Legal News

In Raj Case, Much Talk Monday of Tips on Big Tech Deal

By Ashby Jones

Who knows how Anil Kumar might react on cross-examination?

The former McKinsey consultant might get caught in a web of contradictions or presented with documents he can’t explain. John Dowd, Raj Rajaratnam’s lawyer, might turn him into a teary, stammering mess.

But for the moment, Kumar is dishing out testimony that doesn’t look so good for the Galleon Group founder, on trial for insider-trading.

On Monday, Kumar’s testimony concerned the potential acquisition of ATI Technologies Inc., a Canadian graphics company, by chip maker Advanced Micro Devices. Kumar told the jury how he leaked details of “super confidential” negotiations between two technology companies to the hedge-fund chief, who was shocked at the terms of the possible deal. Kumar advised AMD on the deal. Click here for the WSJ story.

For months before the deal was announced in July 2006, Kumar testified, he had been discussing AMD’s plans with Rajaratnam. Kumar testified that Rajaratnam had been paying him $500,000 a year for inside information, which was reinvested in Galleon through an account in India under his housekeeper’s name.

“I told him that this was red hot and just should not be discussed with anyone,” Kumar said.

Assistant U.S. Attorney Jonathan Streeter said in his opening statement last week that Rajaratnam purchased 50 million shares of ATI stock in the months before the deal, helping him make more than $20 million in profits.

Kumar told jurors that Rajaratnam was taken aback when Kumar told him that AMD was willing to pay more than $20 a share, several dollars higher than ATI’s stock price before the deal was announced.

“Mr. Rajaratnam just said, ‘This is completely ridiculous, it makes no sense. … Are you absolutely sure?’” Mr. Kumar testified Monday. “I said yes. He said, ‘Wow, this is really useful.’”

After the deal was announced, Kumar said, Rajaratnam told him, “We’re all cheering you right now. … He said something like, ‘You’re a star, or you’re a hero.”

Rajaratnam, who is facing 14 counts of conspiracy and securities fraud, has denied wrongdoing. Kumar, who pleaded guilty to conspiracy and securities fraud in January 2010, is the second witness at the trial and hasn’t yet been cross-examined by Rajaratnam’s lawyers.

Full post as published by Law Blog - WSJ.com on March 14, 2011 (boomark / email).