MANHATTAN (CN) – A key cooperating witness for the government in the insider-trading case against Raj Rajaratnam testified on Tuesday that the billionaire co-founder of the Galleon hedge fund gave him more money than he had ever seen in his life.
That witness, former Intel executive Rajiv Goel, claimed that friendship, not money, drove him to become his billionaire friend’s inside source.
Goel, who joined Intel’s treasury department in 2000, says Rajaratnam got tips from two other Intel employees before their arrangement. Rajaratnam gave each of the two earlier tipsters keys to their own BMW, Goel said.
Goel informed Rajaratnam about a $3.2 billion investment Clearwire had landed when the deal was still confidential, Intel executive Sriram Viswanathan said in court yesterday.
Prosecutors say Rajaratnam used such tips to create the largest insider-trading scheme in history, which earned him more than $45 million. The government’s ensuing investigation has brought guilty pleas from more than 15 alleged associates and tipsters, including Goel.
“As a friend, I gave information to him,” Goel testified on Tuesday, adding that Rajaratnam “helped me financially a few times” by loaning and gifting him hundreds of thousands in cash and stock options.
The two of them first met while studying business at the University of Pennsylvania’s prestigious Wharton School. They also vacationed together twice and were “very good friends,” Goel added.
Goel told the court that Rajaratnam loaned him $100,000 in 2005, but that Rajaratnam never asked him to pay the loan back. A year later, Rajaratnam gifted Goel $500,000, which he put in to a bank account at Credit Suisse.
“I had never seen so much money in my life,” Goel said.
The Intel executive said he always wanted to open the Swiss bank account because there had been a “mystique” of rich people in India opening them.
When Rajaratnam paid another of his tipsters, Anil Kumar, he did so by instructing Kumar’s housekeeper to open an account through Pecos Trading Corp., in Geneva, Switzerland, Kumar testified earlier in the trial.
Like Kumar, Goel says he never disclosed the money on his taxes.
“This money was meant for India,” Goel said, adding that he later transferred it to his Indian bank account.
Unlike Kumar, Goel claimed that it was his own idea to use an overseas account, and he insisted that the money was not a quid-pro-quo arrangement for inside information.
Goel said that the original $100,000 “loan” was to finance the purchase of a house in California, and he claimed the half-million “gift” was to aid his family when his father became deathly ill in India.
He said he eventually used part of the gift to repair and refurbish the house financed by the original loan, after it became infested with rats.
In addition to cash, Goel said he earned more than $17,000 from stock that Galleon invested on his behalf in the graphics chip maker ATI Technologies. He earned another $19,000 or so from fruitful investments in the mobile technology company @Road.
Rajaratnam had inside information about acquisitions involving both companies, Goel said.
In 2007, Rajaratnam started asking him specific information about Intel’s quarterly earnings and the progress of technology being developed, Goel said.
He added that he was “nervous” about giving him accurate information because he did not want a bad tip to impact their friendship.
“I was very nervous because Mr. Rajaratnam was a very close friend,” Goel said. “I was worried that if the information was wrong, he might be angry.”
His direct examination continues on Wednesday.