Rajaratnams brother under scanner

Written by New York Times | Updated: Mar 30 2011, 14:32pm hrs
A former colleague of Raj Rajaratnam, the hedge fund manager on trial on insider-trading charges,told federal agents that he saw the brother of Rajaratnam remove notebooks from the funds offices on the day of Rajaratnams arrest, according to court papers.

The trial of Rajaratnam, who the government contends earned $45 million by trading on illegal stock tips, entered its fourth week in Federal District Court in Manhattan. And much of the interesting action at the trial on Monday was revealed on the courts docket rather than in the courtroom itself.

Rajiv Goel, a former Intel executive, testified on Monday for the fourth day. Goel has pleaded guilty to passing confidential information about Intels financial data and business strategy to Rajaratnam, who before his arrest in October 2009 ran the Galleon Group hedge fund.

The cross-examination of Goel by Terence J Lynam, Rajaratnams lawyer, centered on whether that confidential information was material to a stock investor, and was therefore insider trading under the securities laws. It is a theme that the defence has emphasised in the first three weeks of the trial.

Lynam asked Goel if he even knew whether the confidential data about Intel that he said he had divulged would make someone buy or sell the stock. How that was processed by Rajaratnam, I dont know, Goel said. It is material in my mind, sir. Prosecutors also called an investor relations executive at Xilinx, a semiconductor company, to the witness stand Monday.

The executive, Rick Muscha, testified about internal Xilinx e-mail and meetings detailing disappointing financial results at the company. The government accuses Rajaratnam of trading Xilinx during this period based on tips from Kris Chellam, a senior Xilinx executive who later joined Galleon.

The sometimes protracted testimony on Monday delayed the appearance of Adam Smith, a former portfolio manager at Galleon, who is now expected to testify on Tuesday. Smith is a main government witness and has pleaded guilty to trading on insider information. He will be the first Galleon employee to testify at the trial.

Much of the legal sparring Monday was over the contours of Smiths testimony, expected on Tuesday. Papers filed with the court by the defence previewed what he might say. In an interview last month, Smith told agents from the FBI that he had met with Rengan Rajaratnam, the younger brother of Rajaratnam, last spring outside a Starbucks on Park Avenue.

There, Rengan Rajaratnam asked about Smiths little black book of information, according to the FBI interview. Rengan Rajaratnam told Smith that he had wanted to confirm that he was not going to say anything about the notebooks or black book, the FBIs notes said.