(Left) Rajiv Goel and Raj Rajaratnam
Sept. 25: An India-born former Intel executive who leaked secret information about his employer to Raj Rajaratnam, the fallen hedge fund billionaire, avoided prison yesterday when a judge sentenced him to two years’ probation.
The former executive, Rajiv Goel, provided prosecutors with extensive assistance in prosecuting Rajaratnam. During the hedge fund titan’s trial in 2011, Goel was one of the three crucial government witnesses who testified against him.
The other two witnesses — Anil Kumar, a former McKinsey & Company executive, and Adam Smith, a Harvard-educated former Galleon Group trader — also received probationary sentences.
Rajaratnam is now serving an 11-year sentence at a federal prison in Massachusetts. Judge Barbara S. Jones, who sentenced Goel in a Federal District Court in Manhattan, said that she had given him probation because of his extraordinary help in building a case against Rajaratnam and his essential testimony during the trial.
She also noted that he had already paid a price for his crimes. “You showed good sense in deciding to co-operate,” the judge said. “You have already been punished in the sense of the shame you feel for your family and your having lost your career.”
The 54-year-old Goel, who lives in Palo Alto, California, has not worked since Intel fired him after his arrest.
Appearing in federal court yesterday and accompanied by his wife, Goel pleaded for leniency in a brief statement that he read to Judge Jones. “I had a serious lapse of judgment and good sense and I deeply apologise,” said Goel, speaking in a soft mumble.
“I hope that I am given another chance to repair the harm that I have caused and am deeply ashamed for the mistakes that I have made.”
The US attorney’s office in Manhattan has charged 70 people with insider trading crimes since 2009. Of those, 64 have either pleaded guilty or been convicted at trial.
Many of the defendants served as pawns in the sprawling insider trading conspiracy orchestrated by Rajaratnam, who ran the hedge fund Galleon Group. At the height of his powers, Rajaratnam managed more than $7 billion and was considered one of Wall Street’s savviest stock pickers.
Goel and Rajaratnam had stayed in touch since their days as classmates at the Wharton School at the University of Pennsylvania. Their paths subsequently diverged. While Rajaratnam became a hedge fund giant, Goel was an unsatisfied middle manager at Intel. Goel, a native of Mumbai, envied the success and power of his old business school pal.
Rajaratnam lured Goel into his insider trading conspiracy by bestowing favours upon Goel. He lent him about $600,000. Rajaratnam made about $750,000 trading — often illegally — in Goel’s brokerage account. At the same time, he would press Goel for confidential information about Intel.
Eventually, Goel succumbed to Rajaratnam’s cajoling, giving him advance word of Intel’s financial results and a major investment that the chip maker had planned to make, allowing his old friend to earn hundreds of thousands of dollars in illegal profits. At yesterday’s sentencing, David Zornow, a lawyer for Goel, called Rajaratnam a “master manipulator” and “clever seducer” who played his client “like a fiddle”.
Federal authorities investigating Galleon had secretly recorded telephone calls between Rajaratnam and Goel. The conversations revealed not only a close friendship but also the swapping of secret information about Intel. The two were arrested on the same day in October 2009.
While Rajaratnam fought the charges, a number of his ostensible tipsters, including Goel, pleaded guilty and helped the government in its prosecution.