Hedge fund tycoon Raj Rajaratnam set out "to conquer the stock market at the expense of the law" using what they called his "corporate spies" including at least three Indian Americans, prosecutors alleged.
Presenting concluding arguments in the biggest insider trading trial in the US here Wednesday, US Attorney Reed Brodsky said the Galleon hedge fund co-founder was at the centre of a network of friends and "corporate spies", who passed on secret share tips.
Brodsky recalled evidence that Sri Lankan-born Rajaratnam engaged in five insider-trading conspiracies, citing leaks he allegedly got from among others two Indian-Americans, former McKinsey & Co partner Anil Kumar and ex- Intel executive Rajiv Goel.
Other tips came from former Galleon portfolio manager Adam Smith, New Castle Funds LLC analyst Danielle Chiesi and former trader Roomy Khan, he said reminding the jury of the 45 secretly wiretapped recordings played during the seven-week trial.
Kumar, Goel and Smith have pleaded guilty in the case and testified for the prosecution.
Brodsky alleged that Kumar had proposed that Galleon hire McKinsey for consulting work. Instead, Brodsky said, Rajaratnam lured Kumar into an illegal scheme by paying him $500,000 through a secret offshore account. "Your common sense tells you he corrupted Kumar."
The prosecutor reviewed Kumar's alleged tips to Rajaratnam about a transaction involving McKinsey client Advanced Micro Devices (AMD) and ATI Technologies and showed how Rajaratnam's trades corresponded with leaks.
Brodsky alleged Rajaratnam lured Goel, his friend from graduate school, into providing tips about Intel after loaning Goel $100,000 and giving him $500,000.
"That money and their friendship gave Mr Goel more than enough incentive" to become Rajaratnam's "corporate spy," he said.
Brodsky also alleged that Rajaratnam and former Indian American Goldman Sachs board member Rajat Gupta had engaged in an insider-trading conspiracy in which Gupta passed him inside information about Goldman Sachs.
The prosecutor alleged that Gupta gave Rajaratnam a tip that Warren Buffett's Berkshire Hathaway Inc. would invest $5 billion in the bank and another about the bank's unexpected losses.
"Rajat Gupta was at the pinnacle of power, sitting on one of the most prestigious boards in the world," Brodsky said.
He cited a July 29, 2008, call in which Rajaratnam asked Gupta about Goldman Sachs considering acquiring a commercial bank, to which Gupta answered "Yeah there was this big discussion at the board meeting."
"This is Mr. Rajaratnam asking for confirmation of a rumour, why?" Brodsky said. "Because you don't trade based upon a rumor, you don't trade based upon a Flyonthewall report."
"You trade based upon the real fly on the wall, Mr Gupta, the person who is in the Goldman board room, who knows what Goldman is really going to do."
Phone records reviewed by Brodsky show Gupta calling Rajaratnam 16 seconds after he learned of the Berkshire investment. In a tape Brodsky played, Rajaratnam is heard saying that he learned news of the investment bank's earnings "from somebody on the board of Goldman Sachs."
Brodsky presented to jurors Galleon trading records showing Rajaratnam bought 350,000 shares of Goldman worth $43 million which the prosecution said was based on Gupta's tip.
The prosecutor showed the court an excerpt from a wiretap in which Rajaratnam said, "I got a call" adding "something good may happen to Goldman."
Gupta, who was sued by US regulators in an administrative action, has not been criminally charged.