Galleon Trial Turns To Intel, Hilton Deals

Mar 22 2011 | 1:34pm ET

The insider-trading trial of Galleon Group founder Raj Rajaratnam resumed yesterday, with the jury hearing evidence of allegedly illegal trades in Intel Corp. and Hilton Worldwide shares.

Prosecutors played several taped phone calls between Raj Rajaratnam and former Intel executive Rajiv Goel, who has pleaded guilty and is cooperating with prosecutors. On the wiretaps, the two discuss a proposed 4G wireless Internet joint venture between Intel and Clearwire Corp. The two men talked about how much Intel might invest in such a business.

Some of those details were confidential, Intel executive Sriram Viswanathan testified. Viswanathan added that Goel, who worked in Intel's treasury group, would have had access to information about the deal.

Unsurprisingly, Rajaratnam's defense team took issue with both assertions, submitting into evidence a so-called "list of knowers" for the Clearwire deal that did not include Goel, and noting that the supposedly inside information was public knowledge, anyway.

"The press was following the developments in regards to Intel and Clearwire and reporting on them regularly," Terence Lyman said. "It was out there."

"These were public speculation, combined with a couple of facts," Viswanathan replied.

"The stock market doesn't sit around and wait for a public announcement," Lyman went on. "Money managers have to connect the dots, right?"

Prosecutors also sought to make clear that Goel, at least, thought what he was doing might be wrong. On one of the tapes, Goel tells Rajaratnam, who asked about Goel's laughing children, that his kids mock him when he spoke with Rajaratnam because "I talk so softly."

Earlier yesterday, prosecutors presented evidence that Rajaratnam turned a $4 million profit in one day by trading on inside information about Hilton's impending takeover by the Blackstone Group. Rajaratnam is said to have learned about it one day before the deal was announced from Roomy Khan, a former Galleon and Intel employee who allegedly heard about the deal from Moody's Investors Service analyst Deep Shah, the only fugitive in the Galleon case.

Moody's analyst Margaret Holloway testified that she told Shah about the deal on July 2, 2007; it was announced after the market closed on July 3. Holloway said Hilton's stock price "started to creep up" after she told Shah.

Prosecutors say Rajaratnam doubled Galleon's stake in Hilton on July 3, prior to the announcement.

But a Rajaratnam lawyer, Michael Starr, noted that Galleon had been gradually increasing its stake in Hilton before Khan is alleged to have given Rajaratnam the scoop on the Blackstone deal. He also pointed to six reports published that year pointing towards a Hilton sale.

Khan has pleaded guilty to insider-trading and is cooperating in the investigation.


In Depth

Debunking Conventional Investment Wisdom

Feb 8 2017 | 3:22pm ET

Due diligence in the hedge fund world has long involved some combination of the...

Lifestyle

'Tis the Season: Wall Street Holiday Parties Back In Fashion

Dec 22 2016 | 9:23pm ET

Spending on Wall Street holiday parties has largely returned to pre-2008 levels...

Guest Contributor

iCapital Network: The Trump Effect On Direct Lending

Feb 23 2017 | 4:21pm ET

The arrival of the Trump Administration has raised questions among private debt...

 

From the current issue of