Motive for Stock Leak Can Be Respect, Love
Testimony in Galleon Case Shows Greed Isn't Everything
Blame it on the money. On the love. Or just a primal need to be liked.
As testimony began last week in the Raj Rajaratnam insider-trading trial, the question hanging over the courtroom was why rich, powerful people would leak inside information and risk going to jail for it.
Some answers started to emerge in the testimony of 52-year-old Anil Kumar, who served as a technology adviser for the prestigious consultancy McKinsey & Co.
Greed appears to be a top motivator for Mr. Kumar and others, testimony and court documents show. But other less-obvious factors seemed to have played a role for the sources of Galleon Group's Mr. Rajaratnam, including friendship, romance and a yearning for greater respect.
Speaking eruditely, with a pained, hangdog expression, Mr. Kumar described his descent from the pinnacle of the business world to become a self-admitted felon aiding Mr. Rajaratnam.
He described how Mr. Rajaratnam, a longtime friend, praised his insight regarding technology companies. "You have such good knowledge that is worth a lot of money to me," he said he was told by Mr. Rajaratnam, who urged him to accept pay as a "private" consultant.
Mr. Kumar relented "after some discussions" and decided to accept $2 million in payments, some through an offshore account under his housekeeper's name, he testified. Mr. Kumar, who pleaded guilty to conspiracy and securities fraud, will take the witness stand again on Monday.
While varied motives for insider trading by Mr. Rajaratnam's alleged conspirators may surface at trial, they aren't necessarily legally relevant, says C. Evan Stewart, a partner at Zuckerman Spaeder LLP in New York. "It's the question, 'Did you do it?' " he says, not if "you have a good intention or a bad intention. You passed it along to your mother because you love your mother...So what?"
Still, jurors and spectators are left to wonder. "The jurors are weighing the motivation of every witness who is testifying...to weave a compelling version of what happened," says lawyer Andrew Stoltman, who isn't involved in the case.
Lawyers for Messrs. Rajaratnam and Kumar declined to comment.
When Rajiv Goel, a 52-year-old former manager in Intel Corp.'s treasury department (NASDAQ: INTC - News), testifies later in the trial, he is likely to say that his motivation for giving inside tips about Intel was his 25-year friendship with Mr. Rajaratnam.
Earlier he explained his behavior. "I knew it was wrong," he said at a Feb. 8, 2010, hearing where he pleaded guilty to conspiracy and securities fraud. "I gave Raj the information because of my friendship with him."
The defense seized on that friendship to explain why Mr. Rajaratnam gave Mr. Goel hundreds of thousands of dollars. Mr. Rajaratnam wasn't paying for illegal information, the defense said."He was like a brother to Raj," Mr. Rajaratnam's lawyer, John Dowd, said in his opening statement last week.
In 2005, when Mr. Goel asked for a loan for a down payment on his house, Mr. Rajaratnam gave him $100,000, Mr. Dowd said. The next year, Mr. Goel called Mr. Rajaratnam from India and said he was sleeping on the floor of a hospital where his father was ill. Mr. Rajaratnam sent $500,000 to help repair his father's apartment, Mr. Dowd said.
"He asked Raj for help...Goel did nothing in return," Mr. Dowd said.
In the case of Robert Moffat, 54, formerly one of the top executives at International Business Machines Corp. (NYSE: IBM - News), money doesn't seem to have been a motivation—something both his lawyers and prosecutors agree on.
The motive "was not venal and profit-driven," lawyers for Mr. Moffat wrote in a request to a judge regarding his sentencing last August. Mr. Moffat, who isn't expected to testify in the trial, pleaded guilty to passing on confidential information about two companies, including his own, to former hedge-fund manager Danielle Chiesi.
"Perhaps his ego got in the way by making him want to impress someone with whom he had become intimate. Perhaps he just wanted to seem knowledgeable and worldly," Mr. Moffat's lawyers said in the request to the judge. Lawyers for Mr. Moffat and Ms. Chiesi declined to comment.
The two had met in 2002, when Mr. Moffat was "devastated" by his mother's death and moved his family back to the northeast from North Carolina, his lawyers said.
"Ms. Chiesi...was unabashed in telling Bob her ideas about what IBM should do to best present itself to the investment community," they wrote, adding that "apparently Ms. Chiesi ingratiated herself with many corporate executives to pry confidential information from them."
Over time, their relationship became "an intimate one," causing Mr. Moffat, who was married with four children and had spent his entire career at IBM, "to lose sight of the principles he had lived by," the lawyers wrote.
Mr. Moffat, in his own letter to the judge, blamed "a misguided desire to appear important and knowledgeable, and to show Ms. Chiesi that I was 'in the know.' "
Prosecutors agreed that he did it for the 45-year-old Ms. Chiesi, and not money, but said he nonetheless should serve time. In convincing a judge to give him six months in prison, they said the executive had "put his personal interests above his job."
"Moffat's crimes," they wrote in a court filing, "were surely committed out of arrogance and a misguided belief that he could never be caught."
Mr. Moffat, who earned $11.2 million in 2009 at IBM, is serving six months in a Brooklyn jail.
For her part, Ms. Chiesi, who pleaded guilty to conspiracy to commit securities fraud in January, has told people in private conversation that she met with Mr. Rajaratnam because she was flattered he wanted to talk shop with her. She hasn't been sentenced.
Blame it on the money. On the love. Or just a primal need to be liked.
As testimony began last week in the Raj Rajaratnam insider-trading trial, the question hanging over the courtroom was why rich, powerful people would leak inside information and risk going to jail for it.
Some answers started to emerge in the testimony of 52-year-old Anil Kumar, who served as a technology adviser for the prestigious consultancy McKinsey & Co.
Greed appears to be a top motivator for Mr. Kumar and others, testimony and court documents show. But other less-obvious factors seemed to have played a role for the sources of Galleon Group's Mr. Rajaratnam, including friendship, romance and a yearning for greater respect.
Speaking eruditely, with a pained, hangdog expression, Mr. Kumar described his descent from the pinnacle of the business world to become a self-admitted felon aiding Mr. Rajaratnam.
He described how Mr. Rajaratnam, a longtime friend, praised his insight regarding technology companies. "You have such good knowledge that is worth a lot of money to me," he said he was told by Mr. Rajaratnam, who urged him to accept pay as a "private" consultant.
Mr. Kumar relented "after some discussions" and decided to accept $2 million in payments, some through an offshore account under his housekeeper's name, he testified. Mr. Kumar, who pleaded guilty to conspiracy and securities fraud, will take the witness stand again on Monday.
While varied motives for insider trading by Mr. Rajaratnam's alleged conspirators may surface at trial, they aren't necessarily legally relevant, says C. Evan Stewart, a partner at Zuckerman Spaeder LLP in New York. "It's the question, 'Did you do it?' " he says, not if "you have a good intention or a bad intention. You passed it along to your mother because you love your mother...So what?"
Still, jurors and spectators are left to wonder. "The jurors are weighing the motivation of every witness who is testifying...to weave a compelling version of what happened," says lawyer Andrew Stoltman, who isn't involved in the case.
Lawyers for Messrs. Rajaratnam and Kumar declined to comment.
When Rajiv Goel, a 52-year-old former manager in Intel Corp.'s treasury department (NASDAQ: INTC - News), testifies later in the trial, he is likely to say that his motivation for giving inside tips about Intel was his 25-year friendship with Mr. Rajaratnam.
Earlier he explained his behavior. "I knew it was wrong," he said at a Feb. 8, 2010, hearing where he pleaded guilty to conspiracy and securities fraud. "I gave Raj the information because of my friendship with him."
The defense seized on that friendship to explain why Mr. Rajaratnam gave Mr. Goel hundreds of thousands of dollars. Mr. Rajaratnam wasn't paying for illegal information, the defense said."He was like a brother to Raj," Mr. Rajaratnam's lawyer, John Dowd, said in his opening statement last week.
In 2005, when Mr. Goel asked for a loan for a down payment on his house, Mr. Rajaratnam gave him $100,000, Mr. Dowd said. The next year, Mr. Goel called Mr. Rajaratnam from India and said he was sleeping on the floor of a hospital where his father was ill. Mr. Rajaratnam sent $500,000 to help repair his father's apartment, Mr. Dowd said.
"He asked Raj for help...Goel did nothing in return," Mr. Dowd said.
In the case of Robert Moffat, 54, formerly one of the top executives at International Business Machines Corp. (NYSE: IBM - News), money doesn't seem to have been a motivation—something both his lawyers and prosecutors agree on.
The motive "was not venal and profit-driven," lawyers for Mr. Moffat wrote in a request to a judge regarding his sentencing last August. Mr. Moffat, who isn't expected to testify in the trial, pleaded guilty to passing on confidential information about two companies, including his own, to former hedge-fund manager Danielle Chiesi.
"Perhaps his ego got in the way by making him want to impress someone with whom he had become intimate. Perhaps he just wanted to seem knowledgeable and worldly," Mr. Moffat's lawyers said in the request to the judge. Lawyers for Mr. Moffat and Ms. Chiesi declined to comment.
The two had met in 2002, when Mr. Moffat was "devastated" by his mother's death and moved his family back to the northeast from North Carolina, his lawyers said.
"Ms. Chiesi...was unabashed in telling Bob her ideas about what IBM should do to best present itself to the investment community," they wrote, adding that "apparently Ms. Chiesi ingratiated herself with many corporate executives to pry confidential information from them."
Over time, their relationship became "an intimate one," causing Mr. Moffat, who was married with four children and had spent his entire career at IBM, "to lose sight of the principles he had lived by," the lawyers wrote.
Mr. Moffat, in his own letter to the judge, blamed "a misguided desire to appear important and knowledgeable, and to show Ms. Chiesi that I was 'in the know.' "
Prosecutors agreed that he did it for the 45-year-old Ms. Chiesi, and not money, but said he nonetheless should serve time. In convincing a judge to give him six months in prison, they said the executive had "put his personal interests above his job."
"Moffat's crimes," they wrote in a court filing, "were surely committed out of arrogance and a misguided belief that he could never be caught."
Mr. Moffat, who earned $11.2 million in 2009 at IBM, is serving six months in a Brooklyn jail.
For her part, Ms. Chiesi, who pleaded guilty to conspiracy to commit securities fraud in January, has told people in private conversation that she met with Mr. Rajaratnam because she was flattered he wanted to talk shop with her. She hasn't been sentenced.
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