The “boasting and bragging” among Galleon Group traders and analysts got so bad in recent years that insiders mistakenly believed that the hedge fund’s founder Raj Rajaratnam was passing illegal tips to famed investor George Soros, a Manhattan federal court jury was told today.
“Did it come to your attention that Raj Rajaratnam claimed to be providing inside information about Intel to George Soros?” Gary Naftalis, the lawyer for Rajat Gupta, asked Galleon trader turned government informant Michael Cardillo.
“I remember something about Intel and Soros. I don’t remember Raj being involved,” Cardillo replied.
Naftalis raised the Soros rumor in an attempt to plant doubt that Gupta, on trial for passing illegal insider tips to Rajaratnam, was indeed the tipster.
Earlier in the trial, Naftalis told the jury the government snagged the wrong guy because Rajaratnam — serving an 11-year prison sentence after being convicted of insider trading — had “sources all over town.”
Cardillo, who has been testifying on and off since Friday, has told jurors that when he was at Galleon he traded two stocks based on tips from “Raj’s guy” at P&G, whom the government has contended is Gupta.
Cardillo said he shorted P&G’s shares in 2009, for example, after Rajaratnam’s brother, RK Rajaratnam, told him the company was on track to announce a decline in a sales forecast. RK said the tip, which proved to be correct, came from “Raj’s guy on the P&G board.”
Naftalis today also asked Cardillo about a former Galleon analyst who once claimed he got a tip from the CEO of women’s clothing retailer Chico’s, but later recanted.
“Did it come to your attention that other people at Galleon were making up sources of inside information that they did not have?” Naftalis asked Cardillo.
Cardillo said it happened, but only on “rare occasions.”
Naftalis also asked Cardillo to recall an incident in which Raj suggested his brother RK could easily get a “heads-up” on a merger deal between his former employer Kraft Foods and British candy-maker Cadbury. The implication, Cardillo said, was that RK would get a heads-up from Kraft CEO Irene Rosenfeld.
“Yes, I didn’t think he was going to get the information,” Cardillo responded when asked if he was skeptical of the implication that Rosenfeld would tip the trader.