Legal News

Rajaratnam Prosecutors Go Big With First Witness

By Ashby Jones

Well, the prosecution didn’t waste any time with formalities during the first day of live testimony at the Raj Rajaratnam trial.

No, it got right to the heart of the matter with a key witness and some of these long-awaited wiretap tapes. Click here for the WSJ story; here for the NYT story.

For starters, a former McKinsey & Co. consultant testified Thursday that he provided inside information about the consulting firm’s clients to Galleon Group founder Raj Rajaratnam.

Anil Kumar (pictured), who pleaded guilty to conspiracy and securities fraud in January 2010, is seen as a star witness in the government’s case against Mr. Rajaratnam.

“Before 2004, did you ever give confidential information about McKinsey clients to Mr. Rajaratnam?,” asked Assistant U.S. Attorney Jonathan Streeter.

“No,” Kumar said.

“After 2004, did you do that?” Streeter asked.

“Yes,” Kumar said.

Earlier Thursday, jurors for the first time heard three of the wiretap recordings of phone calls on which prosecutors said Mr. Rajaratnam received secret tips about public companies.

One call played Thursday morning was between Rajaratnam on his mobile phone and Kumar. On the Aug. 15, 2008, call, Kumar says “they’ve shaken hands” and tells Rajaratnam “you can go ahead and buy.”

In his opening statement Wednesday, Streeter said Kumar told Mr. Rajaratnam, on a recorded call, that a Middle Eastern investor and Advanced Micro Devices Inc. had shaken hands on a deal and that he could buy stock. Rajaratnam bought 10 million shares of AMD stock after the call and bought almost 25 million shares, valued at more than $100 million, after he received more information from Kumar about the deal, Streeter said.

Rajaratnam’s lawyers have argued that his trading and Galleon’s trading were based on a “mosaic” of research, not inside information. In his opening statement Wednesday, John Dowd, one of Rajaratnam’s lawyers, said Galleon spent about $300 million a year on research and prosecutors had failed to do their “homework.”

Full post as published by Law Blog - WSJ.com on March 10, 2011 (boomark / email).