Key U.S. informant Khan testifies at insider trial

Reuters News
Posted: Aug 06, 2012 6:26 PM
Key U.S. informant Khan testifies at insider trial

By Grant McCool

NEW YORK (Reuters) - Roomy Khan, a onetime technology stocks trader known as "Tipper A" and an FBI informant in a U.S. government crackdown on insider trading, testified on Monday to giving confidential information to a California hedge fund manager on trial for securities fraud.

Khan, who is in her early 50s, is a former Intel Corp and Galleon hedge fund employee who taped conversations with Galleon founder Raj Rajaratnam to help prosecutors convict him in May 2011. Rajaratnam is serving an 11-year prison term.

"I had a set of people who I gave information to on a regular basis," Khan, wearing a black pants suit and a white shawl, matter-of-factly told a Manhattan federal court jury, who will decide the case of California money manager Doug Whitman.

Whitman is charged with securities fraud and conspiracy in making $900,000 illegally on inside information, the latest strand of the high-profile Galleon hedge fund prosecutions against dozens of money managers and traders over the past three years. So far, all have pleaded guilty or were convicted at trial.

Whitman has pleaded not guilty. The charges carry a combined possible maximum prison term of 25 years. Whitman's trial before U.S. District Judge Jed Rakoff began on July 31 and is expected to last three weeks.

Khan, a former neighbor and friend of Whitman's in Atherton, California, testified for 40 minutes on Monday and will continue on Tuesday. Khan has pleaded guilty to criminal charges and paid the U.S. Securities and Exchange Commission $1.85 million to settle the regulator's civil case against her.

The SEC complaint filed in 2009 described her as "Tipper A" in a long chain of traders, money managers and consultants caught up in the broad insider trading probe.

Khan is one of three people who pleaded guilty to criminal charges of insider trading and agreed to testify against Whitman in the hopes of earning a lighter sentence. Under the FBI's direction, Khan agreed to record telephone conversations with Whitman that will be presented as evidence at trial.

Khan told the jury about a conviction for wire fraud in 2001 and her plea in the Galleon case in October 2009.

Her association and friendship with Rajaratnam dated to the late 1990s, Khan testified. She described providing him secret information about Intel's "book to bill" report of the chipmaker's top 20 customers. "I used to read it to him and provide some analysis," she said.

In opening arguments at Whitman's trial, a U.S. prosecutor said Whitman illegally used inside sources to get "a sneak peak" on the financial performance of Google Inc, Polycom Inc and Marvell Technology Group Ltd between 2006 and 2009.

Whitman's lawyer told the jury in his opening statement that his client was a career research analyst and trader in technology company stocks who "did not pay or corrupt anyone for inside information."

The case is USA v Doug Whitman in U.S. District Court for the Southern District of New York, No. 12-125.

(Editing by Leslie Gevirtz)