Kumar Says He Told Rajaratnam About AMD Deals

Mar 15 2011 | 1:07am ET

The prosecution's star witness in the Raj Rajaratnam insider-trading trial testified that he passed "super-confidential" information on to the Galleon Group founder, and that on at least one occasion Rajaratnam did the same for him.

In his second day on the stand, Anil Kumar, a former director at McKinsey & Co., said he told Rajaratnam about two deals he was working with Advanced Micro Devices on in 2005 and 2006: the company's proposed acquisitions of Nvidia Corp. and ATI Technologies.

"I told him this was red hot and not to be discussed with anyone," Kumar testified. Kumar, who has pleaded guilty as part of a deal with prosecutors, told Rajaratnam that ATI would be acquired for about $5 more per share than it was trading at the time.

"He said, 'Are you absolutely sure?'" Kumar recounted. "He said, 'Wow, this is very useful."

On the day the deal was consummated in July 2006, Kumar said Rajaratnam called him to say, "We're all cheering you at the office right now. You're a star. You're a hero."

But, when Rajaratnam sent him confidential documents from AMD competitor Intel Corp., Kumar said he was "terrified of having such documents in my office."

"My office was an open-door office. People walked in and out," Kumar explained. "To see an Intel document was not appropriate at all, so I asked my assistant to shred it."

Kumar said Rajaratnam didn't say where he got the 2005 slides detailing Intel's plans for the year, only telling Kumar, "I know you're working at AMD—these might help."

Kumar, who previously testified that Rajaratnam had agreed to pay him $250,000 a year for confidential information about McKinsey clients, said that the hedge fund honcho became dissatisfied with that arrangement soon after striking it. But Kumar sought to preserve the fiction that he was a legitimate consultant for Galleon, even if he was hiding the "work" from McKinsey.

"I thought a consultant arrangement was more appropriate," Kumar said, telling of how he rejected Rajaratnam's offer to pay him based on Galleon's profits on his tips. "Seeing that shares were being bought seemed more like a crime to me."

Other times, Rajaratnam was more generous: The December after the AMD-ATI deal was announced, Kumar said, Rajaratnam called to say, "I want to give you $1 million. Tell me where to send it."

"I almost fell off my chair," Kumar recalled. The bonus was paid to a bank account in India.

Jurors yesterday also heard more than a dozen wiretaps, following the three they heard on Thursday, including ones featuring former Rajaratnam co-defendant Danielle Chiesi and another identifying a third McKinsey consultant who may have passed confidential information to Rajaratnam's brother Rengan.


In Depth

Q&A: Brevan Howard’s Charlotte Valeur Talks Strategy

Sep 18 2014 | 11:18am ET

Charlotte Valeur chairs the board of Brevan Howard Credit Catalysts, an LSE listed...

Lifestyle

Griffin Donates $1M To Rauner's Illinois Gov. Campaign

Sep 22 2014 | 9:29am ET

Hedge fund billionaire Kenneth Griffin definitely has a dog in this fight. The Citadel...

Guest Contributor

Top 5 Predicted Outcomes Of CalPERS' Hedge Fund Divestment

Sep 22 2014 | 8:35am ET

CalPERS’ announcement to divest of hedge funds has created a significant buzz...

 

Videos

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

September 2014 Cover

The London Whale: Rogue risk management

Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.