Anil Kumar, the former McKinsey partner, testified in a New York court on Monday that he told Raj Rajaratnam, the founder of hedge fund Galleon Group, about strategic plans and earnings guidance for at least three McKinsey clients in exchange for payments.
Mr Kumar, a government witness at the insider trading trial of Mr Rajaratnam, told the jury how he leaked details of “super-confidential” negotiations by chip-maker Advanced Micro Devices to buy either Nvidia or ATI Technologies, the graphics companies.
The court heard the 2006 talks were so secret that the project was at first code-named “Supernova,” and then “Go Big”, said Mr Kumar, who advised AMD on the deal in his capacity as a McKinsey’s consultant.
When Mr Kumar updated Mr Rajaratnam that AMD was going forward with the ATI deal, he said he recalled the hedge fund founder questioning him, since Nvidia was the stronger of the two companies. “I said, come on,” Mr Kumar recalled. He told Mr Rajaratnam: “I’m in the inner circle” referring to AMD.
He also recalled later telling Mr Rajaratnam that AMD would pay at least $20 a share, a premium to where the company was trading at the time.
Mr Kumar said he knew that Mr Rajaratnam was buying AMD stock, but he did not want to know the specific details.
When Mr Rajaratnam sought to renegotiate his payment, saying he would pay him after the trades were placed, Mr Kumar objected saying it was too much of a “slap” in the face to acknowledge that he was involved in a “bigger” crime.
Mr Kumar received a “bonus” from Galleon of $1m that year for supplying information about the AMD deal. Not all the deals worked out.
Mr Kumar told Mr Rajaratnam that another one of his clients expected to lose money, so Mr Rajaratam took a short position on the stock.
But the company announced a takeover, causing the stock to rise instead. Mr Kumar said that Mr Rajaratnam said he was “very upset about losing money” this time.
Mr Kumar also offered an account of Mr Rajaratnam’s providing him with unsolicited records from Intel – a rival of AMD.
Prosecutors are expected to play recordings of the phone calls between Mr Kumar and Mr Rajaratnam. Mr Kumar’s account came on the second day of his testimony for prosecutors in Mr Rajaratnam’s trial.
