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Secret tapes show Rajaratnam traded on tips from Goldman source

Posted by on March 31, 2011 0 Comment

New York, March 31 (IANS) Hedge fund tycoon Raj Rajaratnam told a colleague in secretly taped telephone conversations that he would trade on a tip by a source on the Goldman Sachs board about its unanticipated losses.

“I heard yesterday from someone who’s on the board of Goldman Sachs that they are gonna lose $2 per share,” Sri Lankan born Galleon Group founder is heard telling in tapes played in a New York court Wednesday in the biggest US insider trading trial.

“The Street has them making $2.50,” Rajaratnam is recorded telling David Lau, a portfolio manager with Galleon Group, in an Oct 24, 2008, recording. The day before, Goldman Sachs CEO Lloyd Blankfein had briefed board members on the losses.

In the call Rajaratnam says “they have zero revenues because their trading revenue are offset by asset losses.”
“I don’t think that’s built into the stock price” since Wall Street was anticipating a gain, Rajaratnam says. He then says he’s hoping the stock rises to $105, in which case he’s “gonna whack it.”

Rajaratnam is on trial for trading on illegal tips from sources including Indian American Rajat Gupta, a former Goldman Sachs director, who also once headed consulting firm McKinsey.

Gupta has not been charged with wrongdoing by federal prosecutors, but he faces civil charges by the Securities and Exchange Commission.

Prosecutors previously played a tape of Gupta telling Rajaratnam about other board talks, and phone records show a call to Rajaratnam from Gupta’s phone 23 seconds after Blankfein briefed the board on firm losses in October 2008.

Prosecutors say Galleon saved more than $3 million by trading on Gupta’s tip about New York-based Goldman Sachs.

The court Wednesday heard another Rajaratnam tape that the government secretly recorded Sep 24, 2008.

Rajaratnam can be heard telling a colleague that he had exploited news the day before that Warren Buffett’s Berkshire Hathaway Inc. would invest $5 billion in Goldman Sachs. Prosecutors say the tip also came from Gupta.

“I got a call at 3:58,” Rajaratnam is heard on the recording telling his personal trader, Ian Horowitz, “saying something good may happen to Goldman.”

Prosecutors allege records show Rajaratnam bought $43 million worth of Goldman stock and made $1 million in the trade.

Former Galleon portfolio manager, Adam Smith, who is cooperating with the government, has also testified that during the time period of September 2008, he saw Gupta making “bi-weekly” visits to Rajaratnam’s office.

Prosecutors also showed the jury Galleon records showing that Gupta had invested $16.4 million in Rajaratnam’s Voyager Capital Partners Ltd. fund as late as June 2008.

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