The prosecution objected four times as Raj’s defence team tried to distinguish between insider information and the information that Rajiv Goel gave to Raj Rajaratnam.
At the Raj trial on Tuesday, witness Sriram Viswanathan, a senior Intel exec, told the court that if he had known that Intel’s Rajiv Goel was disclosing to Raj information about Clearwire’s deal with Intel –
“You would have been fired on the spot for revealing that kind of information.”
Rajiv Goel would have been fired “spontaneously,” said Viswanathan, because it was against Intel policy to reveal “material nonpublic information,” which Intel defined as “information that a reasonable investor would expect to have an impact on the trading price of the stock.”
But! The defence countered, pointing to the conversation we’ve recreated below, “you’re not testifying that this information is material nonpublic information, are you?”
The prosecution objected and the defence rephrased the sentence — but the prosecution objected again. And again, to the defence’s use of “this information” (too vague, they said), until the defence phrased the question this way:
“Do you know if a money manager would consider this information material nonpublic?”
Viswanathan did not.
The defence was attempting to make a distinction between insider information and what Goel told Raj on the call.
It might have been against Intel policy to reveal information even if it is not considered material nonpublic information. We’ll have more on what was discussed about insider information later today. Stay tuned.
On the call, Goel asks Raj, “did you have time to digest that info I gave you?” Raj replies “yes, I see it very simple… this is how I would analyse it.”
Raj then details the $1 billion that Intel planned to invest in the new Clearwire company, the range of the collar expected (16 or 17 to 20), and that the new company would have $4.7 billion, all of which Goel agrees “yeah” or “Ok” to in response.
Of course the defence could argue that none of this inside information came from Goel. The suggestion that the info came from him because Goel asked Raj, did you digest that info I gave you?” is circumstantial evidence to the jury.
The prosecution could counter that Goel tells Raj two details when he says, “don’t hold me to that date [April 1st] because there are so many people involved… but yesterday our board approved this deal.”
March 20 call between Raj and Rajiv Goel
RG: So did you digest that info I gave you?
RR: Yes, I see it very simple, right?
RR: This is how I would analyse it. You guys put $600 million right?
RR: And then you put a billion. $1.6 billion, right?
RR: And you get 10% of the new company, right?
RR: So at a minimum the new entity is valuable because you’re not putting any strategic stuff right? … Just the current entity without Google… and Comcast…
RR: The new entity will have 3.5 billion dollars in cash, plus they have $1.2 billion. $4.7 billion in cash with a debt of $1 billion.
RR: So 21% of a 16 or 17 billion dollars corporation is 3.6 billion
RR: And Intel owns 10%
RR: At 1.7, so at 3.7…
RG: Yeah, I’m ahead of you…
RR: it’s $20, right?
RR: So you’re putting a collar, so it all makes sense, right?
RR: So that means this stock is going to trade somewhere between 16 and 20.
RR: 17 and 20.
RR: April 1st, right?
RR: April 1st, right?
RG: Ok but don’t hold me to that date because there are a lot of people involved. **
RR: I did my homework, man.
RG: But yesterday our board approved this deal.
** The prosecution argues that this sentence implies that the information came from Goel (“Don’t hold me to that date”) and may have been told to Raj by Goel at an earlier time. The defence argues that the date originated with Raj.