Prosecutors: Morgan Stanley Banker A Rajaratnam Source

Jan 24 2011 | 1:49pm ET

A Morgan Stanley managing director was Raj Rajaratnam's source for information about an upcoming acquisition, prosecutors said last week.

The banker, identified by The Wall Street Journal as Kamal Ahmed, provided information about Advanced Micro Devices' deal for ATI Technologies to a person who then passed the tip on to Rajaratnam. Ahmed's name and that of the alleged Rajaratnam tipster were redacted from a court filing accompanying a superseding indictment of Rajaratnam adding a ninth securities fraud charge to the case against the Galleon group founder.

The indictment against Rajaratnam, who is also charged with five counts of conspiracy and who is set to face trial next month, was dated Jan. 20.

Morgan Stanley was an adviser to AMD on the ATI acquisition and provided $2.5 billion in financing. The firm said that the banker mentioned in the filing has been put on leave; a lawyer for Ahmed told Bloomberg News that he is cooperating with the bank's probe and the he is "confident that when the investigation is completed, and all the facts are gathered, it will be shown that he did nothing illegal or unethical."

Morgan Stanley said it was cooperating with the federal investigation.

The letter from Assistant U.S. Attorney Jonathan Streeter identifying Ahmed as a source was part of prosecutors' effort to subpoena documents from Galleon Management. Rajaratnam's legal team is battling that effort.

Last week, Rajaratnam's former co-defendant in the Galleon case, Danielle Chiesi, pleaded guilty in a deal with prosecutors. She will not testify against him, however.

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