Yesterday’s testimony in the ongoing Raj Rajartnam insider trading case provided some insight into how traders accumulated information about companies that were “in play”, and demonstrated how effective cross examination can potentially discredit the government’s informants/witnesses. Harvard business school educated/Morgan Stanley trained analyst/trader Adam Smith took the stand, and immediately felt the wrath of Akin Gump defence lawyer Terence Lynam.
Mr. Smith, who has pleaded guilty to conspiracy and securities fraud, explained how how helped find and pass along inside information to his boss, Raj Rajaratnam. His testimony fascinated commentators, but seemed to bore both spectators and jurors alike. It did, however, provide some interesting insight into how his helping hand (read conversations with investment bankers and company insiders about pending takeovers) may have been utilized in Mr. Rajaratnam’s trading, specifically in ICST stock during the period in early 2005 before the company was purchased by IDT Corp.
Mr. Smith, realising that both IDT and ICST began with the letter ‘I”, took a page from his investment banking days and code-named his internal memos and correspondence “eyes” to ensure that others would not get wind of the impending deal. What a sneaky and clever rascal he was!
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