A former trusted colleague of Raj Rajaratnam told the jury that he dug up insider information to give "an edge" to his boss, the Galleon Group founder, who is the main accused in the largest insider trading case to hit the US in decades.
Adam Smith, the first Galleon employee to testify, said that he obtained confidential information like companies' quarterly earning, which was like "cheating on a test" because it gave an unfair advantage in decisions related to buying and selling stock.
Smith, who is the US government's third key witness in the case, had pleaded guilty in January.
The 39-year-old, a Harvard Business School graduate, said that he received insider tips about the acquisition of ATI Technologies Inc, a graphic design company, by Advanced Micro Devices Inc, a microchip-processing company from Kamal Ahmed, a former Morgan Stanley investment banker.
Smith also admitted that one year before, in 2005, he learnt about a potential acquisition of Integrated Circuit Systems Inc by Integrated Device Technology Inc, from Ahmed.
Smith, who joined Galleon in 2001, said he got insider information chip-making Intersil Corporation. He described having a "sinking feeling" about the possibility that Galleon had bought shares from the information he gave on the deal.
Prosecutors have to prove that 53-year-old Rajaratnam made $45 million by using leaked confidential information.
His lawyers say that their Sri Lankan-born client conducted his business based on information that was already in the public domain and through research.
Rajaratnam was arrested in October 2009 and charged with making $50 million after gaining the confidential information.
Out of the 26 people arrested in this case, 19 have pleaded guilty. Rajaratnam, however, denies any wrongdoing. If found guilty, he faces up to 20 years in prison.
An artist's impression of the Rajaratnam trial. | Photograph: Reuters
