Witness likens inside info to getting test answers
Wednesday, August 8, 2012
NEW YORK (AP) — A government informant at the heart of history’s biggest insider trading case told jurors Tuesday that obtaining inside information is like getting answers to a school test beforehand.
“There’s no way you can flunk,” Roomy Khan told a jury hearing evidence against a San Francisco hedge fund boss. “You know you’re going to get an A-plus.”
Khan, 53, of Fort Lauderdale, Fla., has long been a central character in a government probe of insider trading in the hedge fund industry that has resulted in more than two dozen convictions, including the downfall of Raj Rajaratnam. He founded a hedge fund that managed up to $7 billion before it collapsed with his 2009 arrest. He is serving an 11-year prison sentence. Khan testified Monday that she gave Rajaratnam inside information as far back as 1997.
Khan made the comparisons between insider trading and cheating in school as she described the enthusiasm for secrets about public companies by financial professionals she met, including the trial’s defendant, Doug Whitman. She said Whitman was among several close friends she routinely fed inside tips between 2004 and 2008, when he lived a 5-minute walk away from her home in Atherton, Calif. Whitman has pleaded not guilty.
She said he sometimes was “almost hounding me” for inside information she could learn each quarter from a close contact at Polycom Inc., a telecommunications company.
“Every quarter he would get after me very aggressively to get information,” Khan said.
Khan said the Polycom contact, originally from India like herself, had dated one of her closest girlfriends and “was very open and forthcoming” about his company’s business, even after she lost $50,000 he had entrusted her to invest for him. She said she made between $300,000 and $400,000 when he leaked early word about one earnings report.
Later, she said, she was introduced to an employee at Moody’s Investors Service who provided her with secrets about upcoming mergers and acquisitions, enabling her to make nearly a half million dollars on two trades. She said Whitman refused those tips, saying: “I don’t want to go to jail.”
The government played audio tapes for the jury of phone conversations between Khan and Whitman. In one taped call, Whitman refers to Khan as “Miss Google.”
Khan testified Whitman was referring to inside information she provided about Google Inc. after obtaining secrets from a woman she had befriended who worked for a company that provided investor relations services to Google.
A prosecutor asked her why Whitman called her “Miss Google.”
“I guess because I gave him the perfect information on Google,” she said.
A cross-examination of Khan that began late Tuesday focused on her guilty plea in a cooperation deal to insider trading and obstruction of justice charges.
Khan admitted forging a document and lying about it to try to defeat a 2009 lawsuit filed by a former maid who demanded overtime pay. Khan, once worth nearly $40 million, said her finances were in shambles.
“I was in the middle of a storm and was not thinking straight,” said Khan, who is awaiting sentencing.
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