AMD, Intel Among Firms That Could Face Civil Action In Insider Trading Case

According to a report from Bloomberg, companies whose information was leaked in the insider trading case could face lawsuits themselves as to how their sensitive data leaked to Galleon. If, according to the report, prosecutors can show that the executives of the affected firms intentionally gave information to traders in order to affect the price of the company's stock that may be grounds for a future lawsuit against any of the firms.

“If a company made a decision for whatever reason that it wanted to make information available to select individuals, that in my opinion would be unlawful,” Mark Rifkin, an attorney at Wolf Haldenstein Adler Freeman & Herz LLP who represents investors, said in an interview with Bloomberg. “We’re paying close attention to the entire insider trading case as it unfolds because you never know what’s going to happen.”

Rajaratnam denies wrongdoing in the case of multiple corporate leaks at the heart of the largest U.S. legal crackdown on hedge-fund insider trading. He is accused of trading tips received from sources inside Goldman Sachs, McKinsey & Co., Morgan Stanley, IBM and Moody’s Investors Service Inc. Rajanaratnam, who could face more than 10 years in prison if found guilty, says the trades were based on research for Galleon that required him to speak to employees inside each of the firms.

Among those expected to offer testimony on behalf of the prosecution before the Manhattan court is former Intel Treasury Department Manager Rajiv Goel, who is accused of tipping Rajaratnam and is expected to testify that he indeed gave him secret information about Intel's earnings.

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"First, Mr. Goel is no longer an employee," an Intel spokesperson told CRN on Monday. "However, as we said at the time this story broke, our policy is to cooperate in investigations of this type and we did so in this case. We will defer any additional comments to the U.S. District Attorney’s office pursuing this case."

Rajaratnam also received leaked information regarding Intel rival from an unnamed individual to a Morgan Stanley Banker, according to prosecutors in a court filing. Former AMD Chief Executive Officer Hector Ruiz allegedly leaked the information to the banker, according to the report, which cited a person familiar with the probe.

“Our position is that we appear to be a victim of an insider trading scheme,” said Mike Silverman, a spokesman for AMD, told Bloomberg. “We’ve been cooperating with the U.S. Attorney’s Office.”

The unnamed banker has reportedly been put on leave, while prosecutors have not charged Ruiz.

Former McKinsey director Anil Kumar is also scheduled to testify on behalf of the prosecution regarding secret information he allegedly leaked to Rajaratnam. Kumar admitted to leaking secret information regarding eBay's plans in 2008 to layoff a large number of its employees. According to prosecutors, Rajaratnam used the information to sell shares of eBay stock short, earning approximately $500,000.