More Galleon Tipsters Identified

Oct 29 2009 | 2:56am ET

Insider trading requires two things, and to get the first, you need insiders. And the alleged insider-trading circle that included Galleon Group founder Raj Rajaratnam apparently had plenty of those.

So far, the biggest name linked to the insider-trading case is that of Hector Ruiz, the former chairman and CEO of Advanced Micro Devices, one of the stocks traded by the alleged insider-trading circle. According to The Wall Street Journal, Ruiz is the unidentified AMD executive who allegedly passed inside information to Danielle Chiesi, who worked at a Bear Stearns hedge fund. Chiesi is one of the six defendants charged in the $20 million trading scam.

Ruiz has not been charged with any wrongdoing. But he is alleged to have given confidential information about AMD’s reorganization last year to Chiesi, who allegedly went on to share it with Rajaratnam. Both Galleon and New Castle Partners, Chiesi’s hedge fund, allegedly traded on the information, although the inside edge failed to produce a profit for them.

Ruiz went on to serve as chairman of Globalfoundries Inc., the former manufacturing operations of AMD that were spun off in the 2008 restructuring. It is unclear if Ruiz is the target of the continuing investigation or if he is in danger of facing charges. Ruiz himself did not trade on the inside information or receive any money for his tips, according to the Journal.

“We are not aware of any allegation of criminal misconduct on the part of any current or former AMD employees, nor have any current or former AMD employees been charged with a crime,” AMD spokesman Drew Prairie said.

Ruiz was not the only source of insider information on AMD, according to prosecutors. Anil Kumar, one of the six indicted in the alleged scheme, also passed on tips he picked up working for McKinsey & Co., which counts AMD as a client.

Kumar, a senior partner at the consulting firm, has been suspended indefinitely. McKinsey said yesterday that it had launched an internal probe of Kumar, who has denied any wrongdoing.

“Our policies protecting client confidentiality are clear and rigorous, and this is the first time in our 83-year history that a firm member has been charged with securities law violations,” Michael Stewart, a spokesman for McKinsey, said in a statement.

The names of several other alleged tipsters have also continued to come out. Polycom, a technology company whose shares were also traded by the alleged circle, has placed senior vice president Sunil Bhalla on administrative leave. According to prosecutors, a senior Polycom executive gave confidential information to the government’s top witness, former Galleon employee Roomy Khan, who then allegedly passed the information on to Rajaratnam. Polycom would not confirm that Bhalla’s suspension was related to the Galleon case.

The Polycom executive was not Khan’s only source of confidential information. Deep Shah, a former Moody’s Investor Services analyst who has been identified as Khan’s source of a tip about the Blackston Group’s takeover of Hilton Hotels, has apparently known Khan for years, as she is the aunt of a close friend. Shah has denied passing any information on to Khan.

Another alleged tipster recently identified in the press is Shammara Hussain, who Reuters reports was the source of information on Google Inc. Hussain worked for Market Street Partners, an investor relations firm, in 2007 and reportedly passed on confidential information to Khan. Google has since suspended its relationship with Market Street.

According to the Securities and Exchange Commission, the Market Street tipster demanded as much as $150,000 per quarter to keep the information flowing. When Khan balked, the complaint alleges, the tips stopped coming.

But Hussain’s lawyer says he client never asked for any money.

“There is no money, no expectation of money,” Julia Jayne told Reuters.

“Whatever her conversation was with people—and I’m not even saying she instigated it whatsoever—was really just a result of naiveté, and not really an understanding of the appropriateness of doing that and the ramifications of it,” Jayne said.

Hussain, who has not been charged with any wrongdoing, wishes to cooperate with the investigation, according to her lawyer.

In Depth

Fitch Says Alternative Asset Managers 'Stable' Despite Dry Powder

Nov 20 2014 | 9:30am ET

Ratings agency Fitch says the outlook for seven publicly traded alternative asset...


Cohen Buys $101 Million Sculpture

Nov 12 2014 | 9:17am ET

Steven Cohen was the sole bidder for a rare Alberto Giacometti sculpture at Sotheby...

Guest Contributor

Why The Big Money Is Going To Europe

Nov 14 2014 | 6:03am ET

Peer-to-peer lending was invented with the individual investor in mind. But despite...


Sponsored Content

    For Hedge Funds, Mastering Data Is Key To Success

    Nov 4 2014 | 9:45am ET

    Data management is important to every business, but for hedge funds, it is critical. FINalternatives recently asked Peter Sanchez, CEO of Northern Trust Hedge Fund Services, how fund managers can deal with the demands of managing data while at the same time remain transparent and abide by operational best practices. Read more…

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…


Futures Magazine

November 2014 Cover

Building a better market

Reg NMS created a huge bifurcation in equity markets and while much of what has followed has been positive, in terms of lower fees and greater liquidity, many traders would like to see the market come...

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.