U.S. v. Rajaratnam: Kumar Rats Out Raj Raj

If you believe Anil Kumar, the prosecution's first rat (a.k.a. witness) in its case against accused insider trader Raj Rajaratnam, then you have to believe Raj Raj and his legal defense team have taken a few solid jabs to the gut that scored several points with the jury.

Today, Kumar, the ex-McKinsey consultant who pleaded guilty to securities fraud and who received a lightened sentence for agreeing to rat out Raj Raj, told the jury that the Galleon founder had given him, among other financial rewards, a $1 million check for his "information services." Kumar also gave specific details about the type of 411 he passed on to Rajaratnam about deals such as Advanced Micro Devices' acquisition of ATI (Kumar was serving as an advisor to A.M.D. at the time).

According to Kumar, the day the acquisition was announced Raj Raj called Kumar to say, "That was fantastic. We're all cheering you right now. You're a star. You're a hero." Kumar said this made him nervous. "I thought champagne was flowing in the office and didn't want this," he said.

What he did want, apparently, was lots of cash.

And at the end of 2006 (the year of the A.M.D. deal) he was paid handsomely. Under an agreement wth Raj Raj, Kumar was to make whatever Raj deemed his information to be worth. At the close of 2006, Kumar discovered what Raj Raj had in mind when he told Kumar: "I want to give you $1 million. Tell me where to send it." In response, Kumar said he almost fell off his chair. This was right before he told Raj to wire those seven-figures ASAP to a bank account in India.

(DealBook)

(Related: Career Guide to Insider Trading: Plea Agreements)