Wednesday, 28 January 2015
Last updated 11 hours ago
Mar 25 2011 | 4:43pm ET
The insider-trading trial of Raj Rajaratnam turned X-rated yesterday with a salty phone call between the Galleon Group founder and his brother.
Prosecutors played a profanity-laced wiretapped conversation between Rajaratnam and his brother, Rengan, discussing media reports of a deal between Intel Corp. and wireless company Clearwire Corp. Former Intel executive Rajiv Goel has testified that he alerted Rajaratnam to that deal about a week before it was picked up by The Wall Street Journal. Galleon bought more than 125,000 Clearwire shares the day before the story broke.
"Oh dude, we're fucked," Rengan, who managed his own hedge fund, Sedna Capital Management, is heard saying.
"Huh?" his brother replied.
"It just hit The Wall Street Journal," Rengan explained.
"The Clearwire stuff."
Later, after Rengan summarized the article, Rajaratnam utters, "O.K. Shit."
"So, I don’t know how much you got in today, but I think is gonna rip tomorrow," his brother, who has not been charged with any wrongdoing, adds.
The tape was played during Goel's testimony, which was interrupted on Wednesday by the appearance of Goldman Sachs CEO Lloyd Blankfein, testifying about another alleged instance of insider-trading by Rajaratnam. Goel said he told Rajaratnam about the Intel-Clearwire deal on March 19, 2008. The Rajaratnams spoke on March 25, and the deal was announced in May.
Goel, who has pleaded guilty in the case, testified that Rajaratnam got testy with him a year after the Intel-Clearwire deal, demanding to know why Goel didn't tip him off to an Intel acquisition in 2009.
"He said, 'How come you didn't tell me?" Goel said. "'Fortunes are made and lost on this.'"
Goel also testified that at another point in 2009, Rajaratnam became annoyed when Goel couldn't get him some Intel financials he sought.
"What kind of executive are you?" Rajaratnam demanded, according to Goel.
Goel said that Rajaratnam earned him several hundred thousands of dollars trading on allegedly confidential information in a Goel brokerage account. The Galleon founder seems to allude to those trades when he told Goel, who had just received an award from Intel, that his employer could only offer a "psychic reward."
Other wiretaps showed the men discussing things not allegedly illegal, such as planned vacations together, Goel seeking help with obtaining a job "with one of your powerful friends," and hotel accommodations for a business school reunion at the University of Pennsylvania's Wharton School, where the two men met.
Rajaratnam's lawyers, cross-examining Goel, asked about their business school days. Goel said the two did not become friends until almost two decades after they graduated in 1983, when Goel joined Intel.
Attorney Terence Lynam sought to show that Rajaratnam's trading in Goel's account wasn't payment for illicit services rendered by the act of a kind and generous friend. And he asked Goel whether Rajaratnam could have been joking when he said he had given a pair of BMWs to two Intel sales employees who allegedly leaked information to him.
"I don't think it was a joke, sir," Goel said.
But Lynam moved to show that Rajaratnam was, at times, at least, quite the comedian, such as the time the hedge fund billionaire promised his friend a "kiss on the cheek."
"I hope he was" joking, Goel said. "If not, I had him figured out all wrong."
"Didn't he sometimes kid you that Intel was a crummy company and he would never buy stock in Intel?" Lynam asked.
Goel also denied that he "cut a deal" to win a lighter sentence.
"I don't understand the expression, sir," he said. "I pleaded guilty."
The trial resumes on Monday, beginning its fourth week. Prosecutors said yesterday that they would use about two more weeks, unless Rajaratnam's defense team, which has sparred with the government several times this week, demanded they called "15 or 20 custodians to the witness stand."
"I don't want him to call any custodians," Rajaratnam lawyer John Dowd shot back, telling U.S. District Judge Richard Holwell that he hasn't received the "stipulations" documents from prosecutors. "I don't appreciate that comment."
Jan 23 2015 | 1:00pm ET
In our new section, FINtech Focus, we will profile one of these firms each week. While fintech is a broad category, we will be focusing on firms that specifically cater to the alternative investment industry. Read more…