A former McKinsey partner has testified in court that he shared insider secrets on chipmaker AMD’s strategy, in order to help a businessman who was subsequently accused of insider trading.
Anil Kumar told a Manhattan district court that he shared the information with Raj Rajaratnam, founder of hedge fund Galleon, in a move that went against McKinsey company rules.
The statements, reported in several newspapers, came on the first day in court of the case against Rajaratnam. The trial is one of the largest inside dealer cases in recent history.
Rajaratnam is accused of forming a network of informants inside technology companies to obtain valuable inside information before trading stocks illegally. He denies the charges.
Kumar – who was once a business school classmate of Rajaratnam – testified in court last Thursday that he accepted consulting fees of $500,000 (£310,000) a year from him. After agreeing this rate and receiving initial instalments of $150,000, he said that he “felt that I owed him something”, it was reported in the Financial Times.
Kumar said that on two occasions he provided Rajaratnam with information on strategies being considered by AMD.
However, while Rajaratnam had begun to ask more “specific” questions on company plans, Kumar said he did not know the exact nature of Rajaratnam’s trading.
Kumar testified that he “was proud” of AMD’s strategy, the newspaper reported, but he added: “Sadly I violated everything in sharing it with Mr Rajaratnam.”
During the hearing, prosecutors played recordings of phone calls made by Rajaratnam over a year-long period. On one of the calls, Kumar was heard saying that AMD had “shaken hands” on a “deal”, and advising Rajaratnam to “buy”.
Kumar has already pleaded guilty to securities fraud, and has agreed to forfeit $2.7 million (£1.7 million) in fees and profits from Galleon. Rajaratnam denies accusations of insider trading and has said he made money through legitimate stock research.
Kumar will reappear in court today.