Photo: Vienze Ziction/Flickr
Yes, today the Raj trial certainly lacked the theatrics of the courtroom sparring between Anil Kumar and Raj Rajaratnam’s defence team, but it set the stage for who we assume will be the government’s next star witness: Rajiv Goel.Today was all about laying the groundwork for Goel to take the stand.
The government hammered home how a deal involving an outsourcing company called PeopleSupport, would prove the government’s argument that Raj and Galleon flagrantly violated non-disclosure agreements and insider trading policies back in 2008.
(The government knew it was hammering; at one point, the prosecutor even apologized to his witness, and basically said, sorry — this won’t go on for much longer!)
Late this morning, Lance Rosenzweig took the stand. He’s on the short side, wears glasses, has brown hair that’s deeply receding, and a friendly face. A friendy face that did its fair share of wincing today.
Rosenzweig founded PeopleSupport, an outsourcing services company that went public in 2004, and which is one of the government’s big examples of dark dealings by Raj.
As we reported earlier, Galleon didn’t have a super-smooth relationship with PeopleSupport. In fact, by the time it had acquired about 25% of the company through buying up its stock on NASDAQ, Rosenzweig and his board were a little edgy.
“You weren’t happy about [the Galleon’s stake], were you?” Raj’s Attorney Terence Lyman asked.
“I had mixed feelings,” Rosenzweig responded, after pausing noticeably after the question. “I was happy about getting support from a large investor. But the board thought it was a large position.”
Clearly freaked out by the possibility of an hostile takeover, PeopleSupport enacted a Poison Pill, to prevent Galleon from buying up any more stock. Raj wasn’t happy about this, his lawyers told the court. He asked to have the plan abandoned — it wasn’t.
Long-story-short, the two parties came to an agreement. Galleon would take a seat on the 7-person board of the company, upping the number to 8, and in return for that place at the table, would support PeopleSupport’s nominees to the board, Rosenzweig testified.
Now, here’s where the government made its play.
- The Galleon designee, Krish Panu, had unbridled access to material, non-public information about PeopleSupport. He signed agreements that strictly forbade him from sharing that information with Galleon except on a “need to know bona fide” basis, and even then, that information could NOT be traded on. Not only was Panu forbidden from revealing that information, so was Galleon and its employees by association, Rosenzweig and also People Support’s former counsel, Peter Pham, both testified.
- “He agreed; he understood it. He’s a fairly sophisticated individual,” Pham said when asked what Panu’s response to having to sign the firm’s Insider Trading Policy once he was appointed to the board. The government says Panu knew it, and Raj did too.
- Despite all this, the government told jurors, Raj relayed information about two major PeopleSupport events to his friend Rajiv Goel — information he’d been told by Panu; information he shouldn’t have really known about in the first place; and information that certainly should not have been traded on before the public had been informed of PeopleSupport’s acquisition by Essar.
Now, imagine replaying the last three paragraphs, over and over and over. And over. And over. And over again. And then you have some sense of what happened today at the U.S District Courthouse in Manhattan. And why we’re waiting with bated breath, for Mr. Goel to hop into that witness box.