Admitted Inside Trader Testifies At NYC Trial
NEW YORK (CBSNewYork/AP) -- A wealthy Wall Street hedge fund founder authorized the illicit gathering of inside information about publicly traded technology companies to "get an edge" on massive trades that made millions, a cooperator testified Tuesday at an insider trading trial.
Adam Smith told jurors that he was hired in 2002 by Raj Rajaratnam's Galleon firm to manage a $100 million fund. Two years later, he said he told the defendant that an Intel executive had offered to leak him advance notice on the computer chip maker's quarterly earnings in exchange for a consulting fee.
"I told him exactly what the conversation was," Smith said of Rajaratnam. "He agreed to it."
The 39-year-old Harvard graduate testified that he regularly sought inside tips to "get an edge" on financial results that were "different from what the expectation on Wall Street was."
The motivation "was to improve the profitability of the firm and to help Raj," he said.
To cover their tracks, Smith said he and others at Galleon were under strict orders by Rajaratnam "to communicate sensitive information verbally or over the phone, but not in written form."
After secretly pleading guilty last year, Smith agreed to record phone calls with targets of the far-reaching securities fraud probe. He said the FBI coached him on how "to get the person on the other end of the call to say something specific."
Rajaratnam, who was arrested in October 2009, is the biggest name to be charged in an investigation that made extensive use of wiretaps and resulted in more than two dozen arrests. Already, nineteen of those arrested have pleaded guilty, and many, like Smith, are cooperating with prosecutors.
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