What is the difference between speculative rumours and insider information?
That question was the focus of much of the testimony on Wednesday in the trial of Raj Rajaratnam, the billionaire hedge fund manager charged with insider trading.
John Dowd, a lawyer for Rajaratnam, sought to discredit Anil Kumar, a main government witness who has pleaded guilty to swapping illegal stock tips with Rajaratnam. A former senior executive with the consulting firm McKinsey & Company, Kumar told the jury in his direct testimony how for years he passed along confidential information about his clients.
On cross-examination, Dowd tried to cast doubt about whether those tips consisted of nonpublic information at all, displaying analyst and news reports with information similar to what Kumar has admitted leaking to Rajaratnam.
For instance, Dowd focused on Kumar?s tips related to Advanced Micro Device?s acquisition of ATI Technologies in July 2006.
The lawyer showed several reports published in the months and days leading up to the deal that discussed the possibility of AMD buying ATI, including an e-mail sent to the company by an analyst with the subject line: ?Please don?t buy ATI, your stock will go down a lot more.?
?The whole industry knew about this deal,? Dowd told Kumar, who maintained that there was a distinction between the market?s speculation and his own factual knowledge.
The exchange between the two men remained as heated as it had been in the first day of cross-examination on Tuesday, with Dowd growing impatient at Kumar?s often lengthy answers. Kumar, for his part, proved at times to be a combative witness, telling Dowd that his assertions were ?wrong? and ?absolutely incorrect.?
When the prosecutor Jonathan Streeter had his chance to question Kumar again, he offered his own slide for the jurors to examine. The printout showed the stock price of ATI before and after the acquisition was formally announced, when its shares surged roughly 25%.
The prosecutor asked Kumar if it appeared that the public knew there would be a deal. ?Absolutely not,? Kumar responded.
Another important question raised through the day?s testimony was whether Rajaratnam paid Kumar more than $1 million for legitimate work at the Galleon Group or for his confidential tips. Dowd showed the jury a Galleon investor presentation that named Kumar as an adviser to the fund.
Insider trading trial gets its own snooze moment
It happens in nearly every trial. The seminal moment that rattles the lawyers and startles the courtroom spectators. It?s the moment . . . when a juror first falls asleep. And it happened on Wednesday morning in the trial of Raj Rajaratnam, the hedge fund billionaire charged with insider trading. At about 12:18 pm, Juror No 18, an alternate, started the patented juror head-bob as he began to doze off during a slow part of the testimony. Within minutes, he was in a full-on midday snooze. After a couple of minutes he snapped out it, perhaps hearing giggles emanate from the gaggle of reporters sitting close by. Juror No 18 stands out from the rest of the panel. Most of the jury is in the 50-year-old range, and the majority are either black or Hispanic. Juror No 18 is a 35-year-old Manhattan resident with a bachelor?s degree in English. He is most definitely the trial?s Hipster Juror.