Whitman Says He Stopped Trading When Suspicious Of Tips

Aug 15 2012 | 12:09pm ET

In his second day on the witness stand in his own defense, accused hedge fund insider-trader Doug Whitman said he thought one of his alleged sources of confidential information was joking or lying when she claimed to have insider tips—and that he stopped trading in at least one stock when he suspected she might not be.

Whitman continued to deny illegally trading in several technology stocks about which three cooperating witnesses earlier testified that they had given him non-public information. He told the jury yesterday, under questioning by his own lawyers, that he thought Roomy Khan, a former Intel Corp. executive and Galleon Group employee, was lying or exaggerating her ability to get confidential information about the likes of Google Inc. and Polycom Inc.

"I thought she was making the story up" about a "contact" at Google, Whitman said. But he was soon disabused of that notion, when Khan allegedly told him her source wanted to be paid.

Whitman said he told his then-Atherton, Calif., neighbor "she'd be crazy to do it and that she shouldn't do it."

It wasn't until a year earlier than the alleged Google tip that Whitman said he suspected Khan might not be fibbing about her access to insider tips about Polycom. During a conversation in April 2006, four years after they met, he became "suspicious that she might have gotten improper information. So I was trained to refrain from trading."

"She told me she knew what the numbers were going to be," Whitman said. "I don't remember the numbers, but she had very specific numbers."

Whitman's lawyer showed the jury trading information that shows that Whitman bought Polycom before his talk with Khan in April but didn't make any trades in the stock in the days after the conversation.

Whitman also sought to blunt the impact of a potentially damaging phone call, in which he asks Khan, "you wanna use my inside information" about Marvell Technology Group.

"Just fooling around with her," he explained.

Whitman, who faces decades in prison if convicted, returns to the stand today. Prosecutors may get their first bite at an insider-trading defendant on cross-examination today; Whitman is the first man charged in the crackdown to testify in his own defense.

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