Former McKinsey partner Anil Kumar testifies to selling secrets to Rajaratnam

A former Indian American partner of consulting firm McKinsey & Co, Anil Kumar, has accepted that he sold secrets about his clients to billionaire hedge fund tycoon Raj Rajaratnam for $1.75 million.
 
Kumar told a US court in the biggest US insider trading trial in years, that Sri Lankan-born Galleon hedge fund founder, Rajaratnam put the money in his account against his will.
 
Kumar said it was because of Raj's largesse (that agreement was for  $250,000 per year) that he felt obliged to pass on secret informatin related to AMD, a micro chip company whose shares Rajaratnam allegedly traded improperly.
 
A remorseful Kumar said he violated his confidentiality agreement with McKinsey and AMD as "Raj kept asking and I felt I owed him something given how much he paid me."
Kumar said that a couple ot times he felt he had to pass on information to Raj as Raj was paying him.
 
Kumar said he specifically shared with Raj material confidential information about  "Octeron," a chip that AMD was secretly making (its code name was "Maid" because it was so top secret) to challenge Intel's big business with HP.
 
On being told about the "Octeron" chip and AMD's planned move to sell it to HP or Dell to undermine Intel's business with the companies, Raj said that was very useful information, according to Kumar.
 
In his testimony Kumar said Raj was the only person with whom he shared info and he only passed it on to him because Raj had put $250,000 into his account without his knowledge.
 
According to Kumar he came to know about the payments entered in his account a few weeks from the date of the transaction.
 
Kumar said that according to Rajaratnam's plan, payments would be transferred from  "Instanet," a company apparently used by hedge funds and other financial firms to make "soft dollar" payments to experts, to "Pecos Trading," an offshore company in Switzerland. From Pecos, the money would be transferred in the name of Kumar's housekeeper, Manju Das.
 
The Manhattan court also for the first time heard Rajaratnam's voice capture on FBI wire taps.
 
Earlier the Manhattan court also for the first time heard the voice of Rajaratnam captured on FBI wiretaps where in he is heard at times giggling with associates and speaking rapidly in a high-pitched voice, rattling off numbers and acronyms for companies.
 
In addition to Kumar, the recordings also featured another friend-turned-government-witness, Intel Corp's Rajiv Goel, as also Adam Smith, a former Galleon employee, who is also to testify testify in the two-month trial.
 
Smith and Rajaratnam are facing charges of conspiring to obtain secret information about a potential acquisition of Vishay Intertechnology Inc, which has been cited in charges against both men.
 
Kumar who is among 19 people to have pleaded guilty to conspiracy or fraud charges, will continue his testimony is to resume on Monday.
 
According to the prosecution Rajaratnam made  $45 million in illicit profit from 2003 to March 2009 through insider trading. His lawyers counter that he conducted legitimate stock research and not throuh any unfair advantage over other investors.
 
Rajaratnam was seen taking notes on a legal pad while Kumar testified as he avoided Rajaratnam's gaze.
 
The Sri Lankan-born Rajaratnam, free on bail following his October 2009 arrest, faces charges of setting up a network of tipsters who passed him inside information.

The US Securities and Exchange Commission has also accused Rajat Gupta, Mckinsey's former chief, of supplying Goldman Sachs secrets to Rajaratnam, when he sat on the bank's board.
 
According industry experts what makes the case different from other insider trading scandals is the government's widescale use of wiretaps which was had not been used in earlier scandals as the ones involving speculator Ivan Boesky and junk bond financier Michael Milken.