Photo: Wikimedia Commons
Today the first witness on an exhaustive laundry list of potential testifiers took the stand in the insider trading trial of Galleon founder Raj Rajaratnam. Plus, we heard Raj’s voice for the first time.That was cool, but sadly, the recordings we heard weren’t as scandalous as we’d been anticipating. Not to worry; we assume it’s only a matter of time.
Today the courtroom, which was packed so tight yesterday that two extra chambers equipped with closed circuit television had to be set up for the overflow, was less crowded.
FBI Special Agent Diane Wehner, a slim woman with straight, light brown hair, wearing a blue floral blouse beneath a black blazer, made her way to the stand a little after 9:30 am.
The government used Wehner to introduce the jury to the FBI’s investigation into Raj — in particular, the wiretaps that have become a crucial part of their case.
The government has almost 4,000 recorded sessions — phone conversations, text messages, voicemails — from their two year investigation, and Wehner testified that about 1,000 of those sessions were garnered from Rajaratnam’s tapped phone. Other cooperating witnesses including Danielle Chiesi and Anil Kumar, also had their phones tapped for periods over the past few years..
Wehner, a special agent with an FBI squad called C-1, which deals with crimes related to securities fraud, described the wiretap process for the jury. Wiretap authorizations are granted for 30 day periods, she said, and when one ends, the entire application process begins again. The government requested eight 30 day wiretaps on Raj’s phone, and were authorised in all cases.
The government introduced FBI wiretap records that included the names of former Galleon trader Adam Smith; hedge fund analyst Danielle Chiesi; McKinsey executive and Raj buddy, Anil Kumar; former IBM executive Bob Moffatt; Akamai director Kieran Taylor; Rengan Rajaratnam, Raj’s brother; and Rajiv Goel, a close friend of Raj’s.
The government has recordings of all of them, including Raj, and will use those recordings to try to prove a massive insider trading conspiracy.
Prosecutors played three of those recordings this morning. The jurors (and everyone else) definitely perked up when we realised the tapes were ready to role. We checked Raj’s reaction (who today, is wearing an emerald green tie); there was none. We suppose he has heard his voice before, so for him, it’s really no biggie.
The May 1, 2008 call between Raj and Adam Smith
On a recorded call from May 1 in 2008, we heard Raj talking with Smith about a deal relating to a company called Vishay. Raj begins by asking Smith how he is. “I’ve been better,” he responds. “Listen, ah, I talked to Kamal last night.” Kamal, we assume, is Morgan Stanley banker Kamal Ahmed.
RR: Uh huh.
AS: And ah, they bid on a deal for Vishay… It’s a private equity. And they lost, so CSFB got the mandate… Um but they said they’re finally a willing seller, the deal looks phenomenal to him. So the problem is I won’t be able to get any updates but I’m gonna buy… It’s trading at 9; book value is 18. They just reported yesterday so you don’t have any real risk.
After they discuss the impending acquisition, Raj asks Smith how the market is treating him. “Like a baby treats a diaper,” Smith responds. Raj chuckles.
The August 15, 2008 call between Raj and Anil Kumar
On another call from August of 2008, Raj is talking to Anil Kumar — who is testifying as I write — about an acquisition involving AMD.
AK: So yesterday they agreed on… at least, they’ve shaken hands and said they’re going ahead with the deal.
RR: So, can I buy now?
AK: Go ahead and buy.
Later in the conversation, Raj moves the discussion to Spansion and buying up its stock. “Just do it properly, you know,” Raj says.
The October 1, 2008 call between Raj and Rajiv Goel
In the third and final recording we heard this morning, Raj is on the phone with his old friend and ex-Intel employee Rajiv Goel, discussing trading on People Support.
RR: Hey man, where are you?
RG: Somebody banged my car… I’m at home dealing with the insurance people.
While Raj explains that the stock price of People Support is down based on some bad press that morning, he’s sure the stock is about to surge: “We know because one of our guys is on the board,” Raj says. “They put $41 million in escrow. It’s a $250 million deal.”
Raj also gets flustered because he had made a trade using Goel’s account at Charles Schwab, and they’d bungled the trade.
You know that the f***kers did? They took the… they printed for 9.65 and 9.70. Which is ridiculous. It’s like 50 cents above what the stock is trading.
Raj had allegedly wanted to buy the stock at $9.31, according to the defence.
When Raj called to complain, he pretended to be Goel, but when they asked him for Goel’s mother’s maiden name, Raj had no idea and just spurted out a name. They denied him access.
Witness testimony to come
What all this means, of course, is unclear. We assume Anil Kumar’s testimony this afternoon, will confirm the broader context of some of these snippets of conversation, as will other witnesses in later days.
What the government hopes these calls will prove, is that Raj and his alleged co-conspirators were executing trading decisions based on insider tips; the defence argued this morning that the government has been atrociously selective in their recordings, and failed to prove conservations were based on insider trading instead of publicly available information.
Wehner testified that monitoring of Raj’s incoming and outgoing calls would begin early in the morning between 6 am and 9 am, and would last until 9 pm to midnight. The FBI did not monitor weekend phone calls, and were prohibited from recording calls in which Raj was speaking to his wife; speaking to an attorney; speaking to a doctor; or speaking to a member of the clergy.
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