October 1, 2020

DealBook: F.B.I. Agent Describes Tips and Galleon Trades

8:43 p.m. | Updated

Over the last three weeks, jurors in the insider-trading trial of Raj Rajaratnam have heard more than a dozen witnesses, been presented with pages of data, listened to snippets of secretly recorded phone calls and been introduced to an alphabet soup of stocks.

On Tuesday, the prosecution sought to connect all the dots as it started to wrap up its case against the hedge fund manager, who is accused of making millions of dollars in illicit stock trades.

Federal prosecutors pointed to a dizzying array of documents related to those stocks, including records of calls, trades, instant messages and e-mails between Mr. Rajaratnam, the co-founder of the Galleon Group hedge fund, and a network of contacts.

In each case, they sought to create a narrative of illicit activity. All told, prosecutors revisited 13 stocks, including Hilton Hotels, a company that was acquired on July 3, 2007 by the Blackstone Group.

The Galleon networkAzam Ahmed and Guilbert Gates/The New York Times Click on the above graphic to get a visual overview of the Galleon information network.

A phone log was shown to jurors, detailing a complex tree of calls culminating in the purchase of Hilton shares by Mr. Rajaratnam, prosecutors contend..

The first call was from the Hilton Group to an executive at Moody’s Investors Service, the day before the announcement, alerting the executive to the deal.

Calls then flowed from a junior analyst at Moody’s, Deep Shah, to Roomy Khan, a cooperating witness who has pleaded guilty to insider trading. About half an hour later, Ms. Khan called Mr. Rajaratnam, the phone records show.

The next day, 400,000 shares of Hilton stock were bought using Mr. Rajaratnam’s trading codes. Though other funds at Galleon had previously owned shares in Hilton, the purchase marked the first time all year that Hilton was bought using Mr. Rajaratnam’s codes, according to James C. Barnacle Jr., an F.B.I. agent who testified Tuesday.

Earlier, jurors heard testimony from Rajiv Goel, a former executive at Intel who has pleaded guilty to leaking inside information about his former employer to Mr. Rajaratnam.

Mr. Goel testified that Mr. Rajaratnam had bought Hilton shares in Mr. Goel’s personal trading account. On Tuesday, prosecutors produced that document, which detailed the purchase of 7,500 shares of Hilton on the day of the announcement placed through a Galleon computer.

All told, the trade made Galleon more than $4 million, Ms. Khan more than $630,000 and Mr. Goel about $78,000, prosecutors claimed.

Prosecutors also highlighted trading in ATI Technologies, which they say netted Mr. Rajaratnam nearly $23 million. Anil Kumar, a former McKinsey Company executive, said in trial testimony that he passed along illegal tips about ATI’s acquisition to Mr. Rajaratnam before it was announced in late July 2006.

In court on Tuesday, prosecutors presented an instant message conversation between Mr. Rajaratnam and another hedge fund manager with whom Mr. Rajaratnam was invested.

In the April 2006 exchange, Mr. Rajaratnam tells the hedge fund manager to “buy some atyt,” referring to the company’s stock symbol. When the manager asks why, Mr. Rajaratnam writes: “i will tell u why on fon.”

Prosecutors then showed an e-mail that Mr. Kumar received in May 2006 suggesting ATI was amenable to the acquisition. Then they showed that Mr. Rajaratnam’s position in the stock swelled, reaching almost $90 million before the acquisition was announced.

Mr. Barnacle, the F.B.I. agent who spent Tuesday walking jurors through the various trades and communication records, will be the last witness called by the government before it rests its case. On Wednesday, he is expected to go through records and trades Mr. Rajaratnam is said to have made related to Polycom and Goldman Sachs.

Article source: http://feeds.nytimes.com/click.phdo?i=8bfe5181d0994d278192a88c3b37518b

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