Galleon's insider trading ring 'ran since the 1990s'
October 26, 2009
By Alexandria Sage and Clare Baldwin San Francisco
An informant in the Galleon Group insider trading scandal had a history of sending tips to the firm, according to a court document that surfaced on Friday.
The hedge fund run by billionaire Raj Rajaratnam received highly confidential nonpublic information about Intel from the informant, Roomy Khan, as early as 1998, according to a criminal complaint filed under seal in 2001.
Last week, US federal investigators brought criminal charges against Galleon founder Rajaratnam and five others in the largest hedge fund insider-trading case in history.
Galleon, which managed $3.7 billion (R27.6bn) at the end of last week and boasted strong returns through September, has told investors it would 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 such as consulting firm McKinsey, IBM and rating agency Moody's Investors Service.
According to regulators' complaints, an employee at investor relations firm Market Street Partners tipped off a Galleon informant in July 2007 that Google's earnings would fall below market expectations.
Galleon traded on that information, netting a profit of $9 million - the biggest illegal trades that were 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.
Regulators did not release the employee's name in their complaints.
Julia Jayne, Hussain's lawyer, said her client did not expect or receive compensation.
"The rumour or some sort of suggestion is that she asked for compensation and that is not true," Jayne said, of the allegation that her client had sought money in exchange for insider tips
Last week, the FBI said that an executive with videoconference equipment maker Polycom had passed on information regarding the company's quarterly results as part of the insider trading ring.
On Friday, Polycom said in a filing with the US Securities and Exchange Commission (SEC) that it had put executive Sunil Bhalla on administrative leave, with immediate effect.
The company did not give a reason for the action, and spokeswoman Caroline Japic declined to comment beyond the filing. Bhalla could not be reached for comment.
Khan, the Galleon informant who worked at Intel in 1998, has been identified as one of the key witnesses assisting federal investigators in the case that led to the recent arrests. - Reuters
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