Stocks

Former McKinsey director admits leaking AMD-ATI deal info to Rajaratnam

PTI New York | Updated on March 15, 2011

Galleon Group founder, Mr Raj Rajaratnam. (file photo)

Former McKinsey director Anil Kumar told a jury on Monday that he provided confidential information to Galleon Group founder Raj Rajaratnam on a “super-confidential” deal involving the acquisition of ATI Technologies Inc by Advanced Micro Devices Inc (AMD).

“I told him that this was red hot,” Mr Kumar said. “Please do keep this to yourself... Don’t let anyone know.”

The central question of this insider trading case is whether the Sri Lankan born billionaire earned $45 million by using leaked confidential information.

His lawyers say that Mr Rajaratnam conducted his business based on information that was already in the public domain and through research.

Indian-American Kumar, who has already pleaded guilty, said that he received a $1-million “bonus” for the information he gave on the AMD-ATI deal.

Mr Kumar, 52, said that his ex-Wharton school classmate told him, “I just wanted to thank you... You’re a star...

You’re a hero.”

“I almost fell off my chair,” he added, recalling the call he got from Mr Rajaratnam offering him the money.

Prosecutors allege Mr Rajaratnam, 53, made $20 million in illegal profits from the ATI tip-off.

Mr John Dowd, Mr Rajaratanam’s lawyer, has asserted that Mr Kumar had hidden from McKinsey the money he received from Mr Rajaratnam for above-board consultations and that Mr Kumar was guilty of tax evasion from the IRS for five years.

So far, 19 people have pleaded guilty, but Mr Rajaratnam, who has been charged with 14 counts of conspiracy and security fraud, denies any wrongdoing.

Another Indian-American, Mr Rajat Gupta, a former board member of Goldman Sachs and Procter & Gamble, has been charged by the Securities and Exchange Commission for sharing confidential information with Mr Rajaratnam.

Mr Kumar also admitted that he told the Sri Lankan-born Mr Rajaratnam that McKinsey’s client, AMD, was planning to spin off its manufacturing operations and get a multi-billion dollar investment from Abu Dhabi’s Mubadala Development Co.

On the second day of Mr Kumar’s testimony, the prosecutors played several phone recordings of conversations between him and Mr Rajaratnam including the one on August 15, 2008, in which Mr Kumar said that parties had a “shake hand” on the deal.

After speaking with Mr Kumar, the Sri Lankan billionaire called Ms Danielle Chiesi, a hedge fund trader, who has already pleaded guilty. “AMD will not go bankrupt,” he told her.

A month later when Mr Kumar told Mr Rajaratnam that the deal was going through, the latter again called Ms Chiesi and told her the date was set for October 7.

“I’m a warrior... They can’t kill me... October’s my month,” Mr Rajaratnam said. In the conversation, Ms Chiesi voiced concern that she would be investigated.

Mr Kumar said that Mr Rajaratnam had earlier told him that his “value was diminished” because Ms Chiesi was also getting information from the head of AMD, Mr Hector Ruiz, with whom she had an “intimate relationship’’.

Mr Kumar said that Mr Rajaratnam asked him to tell Mr Ruiz to stop talking to Ms Chiesi, who was spreading the information around and it was no longer exclusive.

He said he replied, “Raj, you’ve got to be kidding, he’s a senior client, he’s older than me... it just didn’t add up.”

Ms Chiesi also reportedly had an affair with former the IBM executive, Mr Bob Moffat, who has also pleaded guilty.

Published on March 15, 2011

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