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Galleon Insider-Trading Case Feeds Silicon Valley White-Collar Bar
The Recorder
October 27, 2009
The Galleon Group insider-trading case has put an army of New York lawyers to work, but with the tentacles of the alleged insider-trading ring reaching into Silicon Valley, the local white-collar bar is also getting a piece.
The case, filed Oct. 16 by the U.S. Attorney and Securities and Exchange Commission in New York, centers around Raj Rajaratnam, founder of Galleon, a N.Y. hedge fund that had billions under management. The government says Rajaratnam made lucrative trades on inside information he received about such Valley tech powerhouses as Google Inc., Intel Corp., Advanced Micro Devices Inc. and Polycom Inc.
The government also charged five others in the scheme, including two Silicon Valley businessmen: Rajiv Goel, an Intel executive, and Anil Kumar, a McKinsey & Co. director who lives in Saratoga, Calif., face charges of passing inside information to Rajaratnam. And the informant who worked for the government for two years to bring down the ring, according to reports in The Wall Street Journal, is Roomy Khan, a wealthy Atherton, Calif., woman who just recently settled a lawsuit brought by her maid for labor violations.
A week after the charges were filed, local companies caught up in the case are lawyering up.
At Intel, where company treasury executive Goel is alleged to have given Rajaratnam inside tips on Intel earnings reports as well as a joint venture with Clearwire, local Orrick, Herrington & Sutcliffe lawyers have been hired to do an internal investigation, according to people familiar with the situation. Intel did not return requests for comment, but has said publicly that Goel has been put on leave.
Polycom has its outside counsel at Wilson Sonsini Goodrich & Rosati looking into the unnamed source who allegedly gave inside information to Khan, who then passed it on to Rajaratnam, according to people familiar with the situation. Late Friday, Polycom said in a filing with the SEC that it had put Sunil Bhalla, a senior vice president, on administrative leave effective immediately, although it did not say why.
Rajaratnam also traded profitably on inside tips about Google earning announcements. Authorities say the tips were passed by an employee of one of Google's investor relations firms, Market Street Partners, based in San Francisco. Market Street is being represented by Berkeley, Calif., white-collar specialist Miles Ehrlich of Ramsey & Ehrlich. Ehrlich said that he has been assured by the government that his client isn't a target.
The former Market Street employee who allegedly passed information on Google was identified in The Wall Street Journal as Shammara Hussain, 23. Hussain is being represented by San Francisco criminal defense lawyer Julia Mezhinsky Jayne.
"She's willing to cooperate with whatever investigation there is," Jayne said Friday.
Jayne is a former Contra Costa County, Calif., district attorney who formed her firm, Campbell & Jayne, three years ago.
In New York, Shearman & Sterling and Gibson, Dunn & Crutcher have scooped some big pieces of the case. Gibson Dunn white-collar defense co-chairman James Walden is representing Rajaratnam.
