It’s day four of the Raj Rajaratnam insider trading trial and Anil Kumar, the former McKinsey exec who’s testifying as a government witness, is still on the stand.
This morning, according to the WSJ, Kumar talked in more detail about his alleged insider trading conspiracy with Raj.
In particular, he relayed details about “super confidential” negotiations between tech companies AMD and ATI that Kumar says he alerted Raj to months before the deal went public.
According to the WSJ, Kumar talked of the top-secret nature of the 2006 deal, which was code-named “Supernova,” and at later stages, “Go Big.” Chip-maker AMD was labelled “Los Angeles,” while the target company, ATI, was referred to as “San Antonio.”
Kumar told jurors that months before news of the deal even reached the Street, “I told him that this was red hot and just should not be discussed with anyone.”
He admitted that Raj, an old college buddy, was essentially dumbfounded when he informed him that AMD was willing to pay more than $20 a share for ATI:
“Mr. Rajaratnam just said, ‘This is completely ridiculous, it makes no sense. … Are you absolutely sure?'” Mr. Kumar testified Monday. “I said yes. He said, ‘Wow, this is really useful.'”
After the deal was announced, Mr. Kumar said, Mr. Rajaratnam told him, “We’re all cheering you right now. … He said something like, ‘You’re a star, or you’re a hero.”
Dealbook reported that Kumar said he was distressed to learn of that reaction: “That made me nervous. I thought champagne was flowing in the office and didn’t want this.”
Kumar also talked about the payment structure for his tips. We heard last week how at first, Raj paid Kumar $500,000 for the year; after 2006, however, Raj upped the award to $1 million. Kumar told jurors that when Raj gave him the news, “I almost fell off my chair.”
Bloomberg also reported on Kumar’s description of the modifications in pay. When Raj wanted to convert the compensation from a flat-rate to a commission-like structure, in which Kumar was paid based on the profits Galleon could earn from the tips, he refused. He claims he “wanted to retain the fiction that he was providing consultant services.”
“I thought a consultant arrangement was more appropriate. Seeing that shares were being bought seemed more like a crime to me,” Kumar told jurors.