Rajaratnam’s secretly recorded phone calls released

Prosecutors in the US’ biggest insider trading case have released the tapes of conversations between the main suspect Raj Rajaratnam and four of his alleged co-conspirators, including two of Indian origin, in which he was allegedly receiving or directing stock tips.

The secretly recorded telephone calls of 53-year-old Sri Lanka-born billionaire Rajaratnam, Galleon group founder, with Mr Anil Kumar, a former director at McKinsey; Mr Rajiv Goel, an ex-Intel executive; and Mr Adam Smith and Mr Ian Horowitz who worked for his hedge fund; had been played by the prosecutors.

“Hey Raj... so yesterday, they agreed on ... at least they’ve shaken hands on and said they’re going ahead with the deal,” Mr Kumar told Mr Rajaratnam, his ex-Wharton classmate, according to the tapes available on the website of American media outlets. “So I think you can now just buy.”

Mr Kumar testified in the court on Thursday that in 2003, Mr Rajaratnam had asked him to work as his consultant, and transferred $500,000 a year into a Swiss bank account in exchange for confidential information about McKinsey every four to six weeks.

“Mr Rajaratnam kept asking me for that information and I felt that I owed him something given how much money he was paying me,” Mr Kumar told the jury on the third day of the trial.

Mr Kumar, 52, has already pleaded guilty to providing secret information to Mr Rajaratnam from 2003 to 2009, including a tip off on the acquisition of ATI Technologies Inc by Advanced Micro Devices Inc.

Mr Rajaratnam, who is charged with 14 counts of security fraud and conspiracy, could face up to 20 years in prison. While he denies any wrongdoing, 19 people have pleaded guilty in the case, including Mr Goel and Mr Smith.

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

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 for five years.

On Wednesday, Mr Dowd said that Mr Kumar was now trying to pin his client and “get a free pass from the government.” He also told the jury that those witnesses who have pleaded guilty but not been sentenced are on a “leash” held by the prosecutors.

He said that all the information used by Mr Rajaratnam was already in the public domain, and his client excelled in research.

The central question of the case is whether Mr Rajaratnam earned $45 million by using leaked confidential information. However, he says his strategies were based on “public information”.

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