Roomy Khan, the informant who is cooperating with prosecutors in the insider-trading case against Galleon Group LLC co-founder Raj Rajaratnam, previously worked at Intel Corp., according to two people who know her.
Information provided by Khan was central to the investigation that led to the arrests of six people, according to a person familiar with the probe, who asked not to be identified because Khan’s name wasn’t disclosed by the government. Khan’s link to Intel is significant because it shows that Rajaratnam may have had more than one inside source at the Santa Clara, California-based semiconductor maker.
Khan, identified by a U.S. Securities and Exchange Commission complaint as “Tipper A,” is a hedge-fund manager who worked for Galleon in the 1990s and sought to rejoin Rajaratnam in late 2005 when facing financial difficulties, according to the agency’s complaint. The Wall Street Journal first reported Khan’s identity yesterday. Khan is identified in the criminal case as “CW,” for cooperating witness.
The cooperating witness began helping the Federal Bureau of Investigation in November 2007 in its inside trading probe in the hope of receiving a reduced sentence, according to court documents. She agreed to plead guilty to charges of conspiracy and securities fraud.
Khan, who in May sold her house in Atherton, California, couldn’t be located. Chuck Mulloy, an Intel spokesman, declined to comment on whether she was ever an employee.
Rajaratnam Liquidating Funds
Rajaratnam, charged Oct. 16 by federal prosecutors with conspiracy and securities fraud, yesterday said he will liquidate his hedge funds, which managed about $3.7 billion. The billionaire also said he is innocent of the charges. New York- based Galleon has been approached by potential buyers of the company and some of its assets, according to a person familiar with the firm.
Rajaratnam is free on $100 million bond. He appeared in federal court in New York with his lawyer today, to post his Manhattan apartment as security for the bond.
The SEC complaint against Rajaratnam alleges he asked the informant if she had inside information about any public company. The witness promised to get access to information on Polycom Inc., a Pleasanton, California-based maker of videoconferencing systems. The two traded shares of Polycom many times, as well as shares of Google Inc. and Hilton Hotels Corp. where the informant got inside information, according to the complaint.
Intel Capital
Rajaratnam received tips on Intel, the world’s biggest chipmaker, from Rajiv Goel, director of strategic investments at its Intel Capital unit, according to the SEC.
SEC spokesman Kevin Callahan, Galleon spokesman Dan Gagnier and Janice Oh, a spokeswoman for the U.S. attorney’s office in Manhattan, declined to comment.
Defense lawyers whose clients are recorded on wiretaps typically try to discredit the testimony of cooperating witnesses, according to Nathaniel Burney, a former Manhattan prosecutor who is now in private practice.
“Informants are usually people who are already in trouble,” said Burney, author of a continuing legal education lecture titled “Hope for Hopeless Cases: Defending Wiretaps and Tape Recordings.”
A good defense lawyer will try to convince jurors that the cooperating witness manipulated the defendant to make him seem guilty, Burney said.
‘Get Someone Else’
“The only thing they can do to help themselves is to get someone else in trouble,” he said.
Besides what court documents show about Khan seeking leniency from prosecutors for her cooperation, she’s also been a defendant in at least two civil cases.
In a lawsuit settled last month, a housekeeper for Khan and her husband said they had violated minimum wage laws. The lawsuit was settled after a judge said that Roomy and Sakhawat Khan had fabricated evidence.
In March 2008, the Khans’ maid, Vilma Serralta, 69, sued the couple for denying her “lawful wages,” according to a complaint filed in U.S. District Court in the Northern District of California.
In the four years Serralta worked for the Khans as a live- in maid, she was paid between $1,000 and $1,300 a month, for 14- hour days that involved cleaning their 9,000 square-foot house, providing childcare and cooking, according to the complaint. That’s roughly $3 an hour.
Khan and her husband were also sued in 2005 in New York by Deutsche Bank AG, Germany’s biggest bank, for failing to repay a promissory note. They were ordered to pay $103,750, according to a settlement filed in New York Supreme Court.
Home Hedge Fund
Khan, 50, was a portfolio manager at a stock hedge fund run out of the couple’s home, said a person who knows Khan. She and her husband bought the house in Atherton, California, the richest town in Silicon Valley, for $10.5 million in January 2000, according to Zillow.com.
That same year, Silicon Storage Technology Inc. acquired Agate Semiconductor Inc., a company where Khan’s husband was president. Telephone calls trying to reach Sakhawat Khan through Silicon Storage weren’t answered.
The Khans sold the Atherton house in May for $9.4 million, according to Zillow.com. A new address and phone number weren’t available.
Junior Analyst
A key tip in the Rajaratnam case started with a junior analyst at Moody’s Investors Service, the Wall Street Journal reported yesterday.
The former analyst, Deep Shah, denied that he passed on any confidential information about Blackstone Group’s takeover of Hilton Hotels, which was cited in the Justice Department’s complaint, in exchange for money, the newspaper said.
Rajaratnam, who was born in Sri Lanka, was sued in New Jersey federal court today by a group of more than 30 victims and survivors of attacks by the Tamil Tigers, a separatist group. The victims claim Rajaratnam and his family foundation gave millions of dollars to the Tamil Relief Organization, which the U.S. Treasury Department in 2007 said was a front for the Tamil Tigers, designated by the U.S. as a terrorist organization.
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