Legal News

In Raj Trial, Prosecutors Go Back to the Tapes

By Ashby Jones

The second week of Raj Rajaratnam’s insider-trading trial wrapped up on Thursday (Fridays are off days) and once again, prosecutors returned to the tapes — audio tapes that, they allege, provide more evidence that Raj was making illegal trades.

Click here for Michael Rothfeld’s story in the WSJ; here for the Bloomberg story.

Prosecutors on Thursday played secretly recorded tapes of Rajaratnam’s conversations with a friend, former Intel employee Rajiv Goel.

In the conversations, Rajaratnam can be heard telling Goel that he had recently learned confidential information that a company called PeopleSupport was soon to be acquired. Prosecutors allege that Rajaratnam used that information to make trades in a friend’s account ahead of the deal’s closing when the share price was low.

Rajaratnam’s lawyer, John Dowd, has said contended his client did nothing wrong and traded stocks, including PeopleSupport’s, based on legitimate research.

In a July 30, 2008, phone call with Goel that the government played for the jury, Rajaratnam revealed the exact share price at which PeopleSupport’s stock would be purchased in the deal — by the Aegis BPO division of Essar Group, an Indian conglomerate. Two days earlier, that detail had been given to PeopleSupport directors including Krish Panu, who was nominated previously to the board by Galleon, which owned about 25% of the company.

“So the Ruias made a firm bid now,” Rajaratnam said in the call, referring to the brothers that ran Essar Group. “In the amount, $12.25.”

“Oh, wonderful, wonderful, thanks,” replied Goel.

Prosecutors have said Mr. Rajaratnam made trades in Goel’s investment account as a way of compensating him for inside information about Intel, where he worked in the treasury department.

The trial will resume on Monday.

Full post as published by Law Blog - WSJ.com on March 18, 2011 (boomark / email).