A former Intel Corp managing director testified on Tuesday that he shared the chipmaker's secrets with his close friend, hedge fund founder Raj Rajaratnam, the central figure in the biggest Wall Street insider trading trial in decades.
Rajiv Goel, the second friend-turned-government-witness to take the stand in the trial, described how in March 2008 at Intel the entire place was abuzz with excitement about a possible big wireless network deal involving Clearwire Corp.
Prosecutors accuse Rajaratnam of buying 125,800 Clearwire shares based on inside information on March 24, 2008, just two days before news reports of a possible 4G WiMax venture between Clearwire and Sprint Nextel Corp .
Intel later agreed to inject $1 billion into the project. The Clearwire venture was announced on May 7, 2008.
Goel, 52, said under questioning by federal prosecutor Reed Brodsky that he also shared confidential information with Rajaratnam about Intel's April 2007 quarterly earnings announcement.
I violated my obligations to Intel, Goel said in Manhattan federal court.
Indian-born Goel, speaking clearly into a microphone in the crowded courtroom, told the jury he tipped the Galleon Group founder because they were close friends and Mr. Rajaratnam helped me financially a few times.
Rajaratnam, 53, is the most prominent defendant in the largest U.S. hedge fund insider trading case in history.
Prosecutors have accused him of illegally making $45 million based on tips from insiders, some of whom were highly placed executives in corporate America.
The one-time billionaire has denied wrongdoing, and said his trades were based on his own research and publicly available information. He faces up to 20 years in prison if he is convicted on the most serious charge of securities fraud.
Twenty-six people have been charged in the probe and 19, including Goel, have pleaded guilty. He has yet to be sentenced.
Goel testified that Rajaratnam began seeking information from him about Intel starting around 2002 and 2003.
He's a trader, Goel said. He trades on information.
The trial began March 8 with testimony from an FBI agent who monitored phone taps and from Anil Kumar, a former McKinsey & Co executive and another longtime friend of Rajaratnam who admitted leaking client secrets.
Goel worked at Intel from 2000 until his October 2009 arrest with Rajaratnam and Kumar.
He is expected to testify for two or three days, and will be cross-examined by one of Rajaratnam's defense lawyers.
Goel said his family vacationed with Rajaratnam's family twice. He also said Rajaratnam lent him $100,000 in July 2005 to help him buy his first home and gave him $500,000 the next May when his father became ill in India.
He also said he opened an account with Rajaratnam, who parlayed his investment into a profit of $700,000 to $800,000.
Goel said he learned details of the April 2007 earnings announcement from an Intel investor relations executive. He also said he learned details of the Clearwire transaction from Sriram Viswanathan, an Intel vice president.
Earlier on Tuesday, in his second day of testimony, Viswanathan said Goel would have been spontaneously fired for leaking details of a possible Sprint-Clearwire partnership, including capital commitments from Intel, Comcast Corp and Google Inc.
Viswanathan also said Goel also would not have been authorized to disclose that Intel had held a board meeting on the matter. Those details were disclosed to the jury through phone taps of conversations between Rajaratnam and Goel.
The case is U.S. v Rajaratnam et al, U.S. District Court, Southern District of New York, No. 09-01184.
(Reporting by Jonathan Stempel and Grant McCool, editing by Matthew Lewis, Gerald E. McCormick and Ted Kerr)