New York, April 15 (IANS) Two character witnesses who came forward to testify that inside-trade charges against hedge fund tycoon Raj Rajaratnam are untrue may have been paid millions of dollars, prosecutors told a US court.
Prosecutors allege that Sri Lankan born Rajaratnam made $63.8 million thanks to tips from insiders, including a couple of Indian Americans, and a witnesses who testified Thursday that Galleon co-founder lost $3.8 million on the same trades was well-compensated.
Gregg Jarrell, a professor at the University of Rochester whose testimony the government unsuccessfully attempted to bar admitted that working at a rate of $600 per hour, he has been paid $200,000 and his firm Forensic Economics made $730,000 more.
Jarrell said Rajaratnam traded "mind-boggling" sums through Galleon: $141.5 million daily on stock days, adding up to $172 billion over the last five years.
He called Galleon an "event-driven" hedge fund, which traded largely in a technology industry known to be "very active" in mergers and acquisitions.
Prosecutors allege that he learned about major events in companies like Intel, Advanced Micro Devices (AMD), ATI Technologies, Goldman Sachs and Hilton through tipsters leaking nonpublic information.
Earlier, another witness, former Galleon executive Richard Schutte finished his fourth day of testimony with an admission that he signed a $2 million consulting agreement with Rajaratnam.
Schutte added that his former boss became his biggest investor in a new hedge fund called Spottail Capital.
On Sep 1, 2010, Rajaratnam invested $10 million in Spottail, and he and his family added $15 million more Jan 4, 2011, weeks before trial, Schutte said.
He agreed with US Attorney Reed Brodsky's calculations that standard consulting and management fees show him earning $500,000 on these investments so far, but he vigorously denied that they were a quid-pro-quo for his testimony.
"Absolutely not," Schutte insisted. He added that the $2 million consulting fees were less than he was accustomed to making at Galleon, and it was the hardest-earned money of his life.
"2010 was probably the most difficult working year of my life," Schutte said.