Galleon insider trading web extends back to the 1990s

Galleon insider trading web extends back to the 1990s

Market malfeasance

The hedge fund run by billionaire Raj Rajaratnam received highly confidential non-public information about Intel Corp from the informant, Roomy Khan, as early as 1998, according to a criminal complaint filed under seal in 2001.

Last week, federal investigators brought criminal charges against Galleon founder Raj Rajaratnam and five others in the largest hedge fund insider trading case in history.Galleon, which managed $3.7 billion at the end of last week and boasted strong returns through September, has told investors it will wind down its funds.

Information continued to surface on Friday, linking previously unnamed informants and corporate executives to the trading scandal, which has also entangled big names like consulting firm McKinsey & Co, IBM, and rating agency Moody’s.

Tip off

According to regulators’ complaints, an employee at investor relations firm Market Street Partners tipped off a Galleon informant in July 2007 that Google Inc’s earnings would be below market expectations.

Galleon traded on that information, netting a profit of $9 million, the biggest illegal trades identified in the complaints. Shammara Hussain is the Market Street Partners employee who regulators believe leaked information to the Galleon informant and sought money to continue supplying tips, people familiar with the matter said on Friday. Google has not commented. Last week, the FBI said an executive with Polycom Inc had passed on information regarding the company’s quarterly results as part of the insider trading ring.
On Friday, Polycom, a videoconference equipment maker, said in a filing with the US Securities & Exchange Commission that it had put executive Sunil K Bhalla on administrative leave, effective immediately. The company did not give a reason for the action, and spokeswoman Caroline Japic declined to comment beyond the filing. Efforts to reach Bhalla were not immediately successful.

Roomy Khan, the Galleon informant who worked at Intel in 1998, has been identified in several media reports as one of the key witnesses assisting federal investigators in the case that led to the recent arrests.

According to reports, Khan is the informant known as “Tipper A” in the SEC’s complaint, a hedge fund manager who worked for Galleon in the 1990s and had acted as an informant and tried to rejoin Rajaratnam in 2005 amid personal financial difficulties.

The criminal complaint filed in the US District Court in San Jose in 2001 accused Khan of sending billing reports, product pricing, and sales data about Intel microprocessors for the first and second fiscal quarters of 1998 to a fax machine in Galleon’s New York offices. Khan has also been linked in media reports as the Galleon informant with contacts at Polycom. Attempts to reach Khan have been unsuccessful.