Former Intel Corp. (INTC) executive Roomy Khan, who aided the prosecution of hedge fund manager Raj Rajaratnam, may be called as a witness in Whitman Capital LLC founder Doug Whitman’s insider trading case, prosecutors said.
If Khan testifies against Whitman, it will be the first time she has appeared as a government witness at trial. While Khan was a key informant for the government in its prosecution of Rajaratnam for insider trading, she never testified at the trial of the Galleon Group LLC co-founder last year in New York.
Another possible witness against Whitman is Karl Motey, an independent consultant from California who pleaded guilty and has testified at another insider-trading trial in New York, the U.S. said today in a filing in federal court in Manhattan. The government also disclosed that it may call a third witness, an unidentified New York business person who has cooperated in a federal investigation of insider trading.
The third person was described in the filing by prosecutors as a “parallel tippee of Roomy Khan’s” who received “inside information” about Google Inc. (GOOG) “around the same time as Whitman.”
Whitman was indicted Feb. 10 on charges that he part in two separate insider-trading conspiracies, allegedly using illegal tips on Google, Polycom Inc. (PLCM) and Marvell Technology Group Ltd. (MRVL) to make more than $900,000 for his Menlo Park, California-based hedge fund.
He’s charged with two counts of conspiracy to commit securities fraud and two counts of securities fraud. If convicted, he faces as long as five years in prison on each conspiracy charge and 20 years on each securities fraud charge.
Khan, who pleaded guilty and said she shared tips with Rajaratnam, gave the U.S. evidence that helped lead to a wiretap of his phone. He was convicted by a jury last May of all 14 counts against him and is serving an 11-year prison sentence.
Khan allegedly tipped Whitman about earnings at Polycom, a maker of video-conferencing equipment, and search-engine operator Google before they were made public, the U.S. Securities and Exchange Commission alleged in a civil lawsuit against Whitman.
Assistant U.S. Attorney David Leibowitz said in today’s filing that testimony by the unidentified third witness “and corresponding parallel trading activity will corroborate Roomy Khan’s testimony with respect to her providing Google inside information to Whitman.”
Transfer to California
In today’s filing, Leibowitz also objected to Whitman’s request that his case be transferred from Manhattan to northern California.
Whitman has said most of the witnesses who will testify reside in California. His lawyers also argued that his wife and a child live there and a trial in New York would be disruptive.
“At its heart, this is a Silicon Valley case and not a Wall Street case,” his lawyer, David Anderson, said in a Feb. 16 court filing.
Leibowitz disputed the defense attorney’s assertion that no criminal conduct occurred in New York. He also said that Khan, who used to be Whitman’s neighbor in California, now resides on the East Coast.
“The testimony of Khan and this cooperating witness will show, among other things, that Whitman’s claims in his memorandum artificially minimize the impact of the illegal conduct on the Southern District of New York,” Leibowitz said in his filing. “At the very heart of the conspiracy and the substantive insider trading charges in this case, the defendant voluntarily caused his criminal conduct to occur in the Southern District of New York.”
Asked about today’s government filing, Anderson through a spokesman reiterated his claim that it’s a Silicon Valley case, not a New York case.
U.S. District Judge Jed Rakoff in New York, who is presiding over the case, has scheduled a hearing for Feb. 29 on Whitman’s request to move the case to California. A trial is scheduled for July 30 in New York, court records show.
The criminal case is U.S. v. Whitman, 12-cr-00125; the civil case is Securities and Exchange Commission v. Whitman, 12- cv-01055, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Patricia Hurtado in New York at email@example.com
To contact the editor responsible for this story: Michael Hytha at firstname.lastname@example.org