New York: A profanity-laced phone tap of accused hedge fund manager Raj Rajaratnam and his brother was played for jurors as US prosecutors sought to prove he traded on inside information about a deal that had not yet been made public.
The FBI audio clip was among dozens played so far in the biggest Wall Street insider trading trial in decades. Manhattan federal court jurors on Thursday also heard a lawyer for the Galleon Group founder attack the credibility of a key government witness.
The tap was introduced into evidence during testimony by former Intel Corp executive Rajiv Goel, a friend of Rajaratnam’s for 17 years, who has pleaded guilty and is cooperating with the government.
Goel has admitted to tipping Rajaratnam on 19 March, 2008 about a new wireless network venture between Clearwire Corp and Sprint Nextel Corp in which chipmaker Intel would invest $1 billion.
Prosecutors accuse Rajaratnam of buying 125,800 Clearwire shares on March 24 based on inside information. Rajaratnam’s defense is that his trades were based on his own research and publicly available information.
“Oh dude, we’re f**ked,” Rajaratnam’s brother Rengan, also a fund manager, said on the 25 March, 2008 call. “It just hit the Wall Street Journal.”
The government introduced the evidence to support its allegation that Rajaratnam had inside information and then feared he had lost his edge in the market when details appeared in public before an expected May announcement.
On the call, Rengan Rajaratnam described some details in the article, including possible capital commitments from Intel, Comcast Corp and Google Inc.
“O.K. Shit,” Rajaratnam responded.
“So, I don’t know how much you got in today, but I think is gonna rip tomorrow,” Rengan Rajaratnam was heard telling his brother, apparently referring to trades and how the stock might react.
Goel told Raj Rajaratnam of similar details, according to another phone tap that has also been played to the jury. The Clearwire venture was announced on May 7, 2008.
The government accuses Sri Lankan-born Raj Rajaratnam of making $45 million in illicit profit. If convicted, he could face up to 20 years in prison.
The government says Rengan Rajaratnam, founder of Sedna Capital management, conspired with his older brother, but he is not among 26 people who have been criminally charged. Nineteen have pleaded guilty, including Goel.
In cross-examination, a lawyer for Raj Rajaratnam attacked Goel’s credibility over omission of a Swiss bank account from his tax returns. The jury also heard that Goel had griped to Rajaratnam about working at Intel.
Defense lawyer Terence Lynam asked Goel: “He did not say ‘Rajiv, please don’t leave Intel, I need you to stay to give me inside information, did he?´” to which Goel replied, “No sir, he did not.”
Goel admitted on the stand on Tuesday that he violated his obligations of confidentiality to Intel.
His testimony was suspended on Wednesday when prosecutors called Goldman Sachs Group Inc chief executive Lloyd Blankfein to testify about a former bank director accused by regulators of leaking secrets to Raj Rajaratnam.
There were lighter moments during the cross-examination of Goel. The jury heard a phone tap of Raj Rajaratnam telling Goel “You’re a good guy ...when I see you I’ll give you a kiss on the cheek.”
Lynam asked Goel if he believed Rajaratnam would kiss him.
“I hope he wouldn’t. Otherwise, I had him figured out all wrong,” Goel said, prompting laughter in the courtroom.
The case is USA v Raj Rajaratnam et al, US District Court for the Southern District of New York, No. 09-01184.