1 1395raj1 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ------------------------------x UNITED STATES OF AMERICA, v.

RAJ RAJARATNAM, Defendant. ------------------------------x New York, N.Y. March 9, 2011 09 CR 1184 (RJH)

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THE COURT: Please take your seat. We're going to wait for two more jurors to appear. Now, we'll hear the opening statement on behalf of the defendant made by Mr. Dowd. MR. DOWD: Thank you, your Honor. Good afternoon, ladies and gentlemen. You've met Terry Lynam, and Bill White, and Mike Starr. I just wanted you to know that we're pleased and honored to represent Raj Rajaratnam in this case. And unlike Mr. Streeter, I'm going to tell you about the entire case. Ladies and gentlemen, Raj Rajaratnam is not guilty of SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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52 1399raj2 Opening - Mr. Dowd insider trading or conspiracy. The evidence will show that Raj only traded stocks based on public information, expert research and analysis conducted by Galleon, the investment fund that he founded and managed. You've heard the government state its case, but the evidence will show the government has it wrong. And the government has it wrong because it believed the word of unbelievable people. It focused on snippets of innocent conversations taken out of context. It ignored the public record. Worse of all, it failed to do its homework. We will give you the full picture. Even though, as Judge Holwell has told you, Raj is presumed innocent and has no burden whatsoever. The government's told you it's going to play you some telephone calls that are recorded. We'll show you that the information you hear discussed on those telephone calls was public. We will show you that the company's own public announcements, press releases at investor meetings and in public filings with the government, Securities and Exchange Commission, where the same information appeared days and weeks before the conversations the government will play. We'll show you the newspaper articles and the published analyst reports where the same information had already been made public. We'll show you the real world context in which SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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53 1399raj2 Opening - Mr. Dowd law-abiding investment professionals like Mr. Rajaratnam discuss and trade stocks everyday on behalf of their clients. We live in the real world. And in the real world, there's nothing wrong with talking about stocks and trading stocks or researching companies. These things are going on right now just a few blocks from this courtroom. They are legal to do. It's a good thing for all of us that they are. Investment professionals like Mr. Rajaratnam have a duty to seek out as much public information as they can in order to make smart investment decisions for their clients. And once you hear all of the evidence, you will see that that is all Mr. Rajaratnam was doing on the calls that the government will play. Mr. Rajaratnam and his fund Galleon conducted the best research in the business so Mr. Rajaratnam's investors would have the benefit of all publicly available information and the benefit of expert analysis, fully informed by publicly available information. We will show you that research and analysis. You will see that it shows Mr. Rajaratnam only received public information about the stocks he traded. Let me tell you about Mr. Rajaratnam, Raj, as he's known to his friends and colleagues. Raj is married to his wife, Asha, and they have three children. They live here in the City of New York. The evidence will show that he's a man SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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54 1399raj2 Opening - Mr. Dowd of great loyalty to his friends and colleagues. He's known for his generosity. Indeed, he was generous to a fault; particularly to his friends and former classmates who are now trying to use that generosity to save their skins. Raj was born in Sri Lanka, which is an island nation just south of India. He was educated in England as an engineer specializing in semiconductors, which are materials used to make computer chips. After earning the engineering degree with honors, Raj came to the United States in 1981 to continue his education at the University of Pennsylvania's Wharton Business School. Raj became a citizen of these United States in 1983, the same year that he graduated from Wharton at the top of his class. After graduating, Raj decided to make a career on Wall Street. Through hard work and a great mind, Raj became the foremost expert in semiconductor companies in the investment business at just the time when that industry was beginning to boom as a result of the growing popularity of personal computers. Raj built his success on shoe-leather research, diligence, and hard work. He traveled to Silicon Valley, California, countless times. He talked and listened to everyone who did business with semiconductor companies, including the senior officials of those companies themselves. He assembled a mosaic of information, did his own SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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55 1399raj2 Opening - Mr. Dowd calculations, and figured out where these companies were headed in their own market and in the stock market. That is what good investment advisors do. If you own a 401K retirement plan or a mutual fund, you're relying on a professional like Raj to do this kind of work for you even if you don't know that person. Raj was so successful at this line of work that at the age of 34 he became president of Needham & Company, which he set about making a greater success than it was already. In 1997 Raj created and opened his own investment advisory firm which he named Galleon. Galleon also attracted the most reputable corporate, individual, and institutional investors. These investors, who performed searching due diligence on Galleon before entrusting Raj with their money, included college and university endowments, charitable trusts, private and state pension funds, and wealthy individuals. Galleon was not a fund that served only wealthy people. Far from it. Lots of hard working citizens of modest means invested in Galleon through their pension funds. For example, the New Jersey State Employees' pension fund invested in Galleon. And Raj did exactly the kind of work on behalf of those investors that your fund manager does for you if you have an IRA or a 401K or hold other managed investments. Galleon was a hedge fund. And you will hear it SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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56 1399raj2 Opening - Mr. Dowd referred to as a hedge fund in this trial. So I want to say something about hedge funds. Hedge funds are a lot like mutual funds. They are a way for investors to pool their money and have it invested on their behalf by a professional money manager like Raj, whom the investors hire, and devote all their time and energy to researching companies and making smart investment decisions. If you have money to invest and are not a professional investor yourself, then you probably rely on someone like Raj to manage your investments for you. If you have an IRA or a 401K that invests in mutual funds, you're relying on someone like Raj to manage your money. The evidence will show that it is natural and normal and beneficial for people like Raj to develop relationships with and develop access to the companies they invest in for their clients. People who entrust Raj with their money rely on him to do exactly that. And that's an important point. Because the government will suggest that Raj had some kind of special access to corporate executives and it was wrong for him to have that kind of access. Of course, Raj had access to corporate executives. The evidence will show that talking to corporate executives is what Raj did for a living. It's what his investors hired him to do so they could go about being teachers, and New Jersey state employees, and college endowments, and whatever else, SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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57 1399raj2 Opening - Mr. Dowd knowing that their investments are being well tended. People like Raj are the way that investors get access to corporate executives without having to drop everything else they're doing and become professional stock analysts. They provide a valuable service for their investors. Raj performed this service very well for his clients, as the evidence will show in this case. None of Galleon's investors lost money as a result of the conduct the government has alleged. None of them. (Continued on next page)

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58 Opening - Mr. Dowd MR. DOWD: (Continuing) Creating Galleon Raj brought stock analysts and stock traders under one roof. He put them on one trading floor forcing them to interact and communicate with each other. Raj also brought together portfolio managers with expertise in different industries. Some were like Raj himself, focused on the technology sector. Others focused on different industries such as health care, consumer goods. Raj attracted the most talented and best-educated research analysts on Wall Street. Like Raj himself, the analysts that he hired to cover the technology sector generally had college engineering degrees. Eventually Galleon employed 165 people including 35 full-time analysts. Dozens of traders. Over a dozen portfolio managers, all of them among the very best in their field. Galleon also spent millions of dollars so its analysts and portfolio managers would have the benefit of the professional analysts outside Galleon who also covered these companies, the so-called sell-side firms such as Goldman Sachs, Morgan Stanley and others. Galleon analysts and portfolio managers reviewed and studies these reports, communicated with the outside, the sell-side analysts every day. As with any business, these reports vary in quality but were part of the mix of information collected as part of the mosaic picture of a company. The information conveyed in these reports was always, by definition, public information. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 1395raj3

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59 Opening - Mr. Dowd At its peak Galleon had approximately six and a half billion dollars of investor money under management and spent approximately $300 million a year on research. The government will suggest that all this research was just a cover for inside trading. The evidence does not support that. Galleon traded billions of dollars of stock every year. The stock trades at issue in this case are a tiny percentage of those trades. It does not make sense to pay so much money for stock research to cover up a relatively small number of trades that the government is challenging. In reality, all of these expenditures were in service of gathering as much publicly available information as possible so that the Galleon analysts and portfolio managers could make the best decisions with their investors' money. Once you hear all the evidence what emerges is that Raj, like every investment professional on Wall Street, was in the business of pursuing information. Public information analysis and prudent judgment is the edge that allow a money manager like Raj or a mutual fund manager or a pension fund manager to evaluate the risk and make the best investment decisions for his investors. The government suggested this information was not available to the general public. The evidence will show that is wrong. The information Raj gathered was available to anyone willing to work hard and dig for it. It was not secret SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 1395raj3

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60 1395raj3 Opening - Mr. Dowd information. Galleon's analysts studied and plotted out the historical trading performance of the stocks they wanted to trade in order to understand how they traded over the different market conditions. They researched the companies whose stock they traded in order to create detailed models of their businesses and you will see those models. You will see those models in this trial and you will see how Galleon analysts used them to predict companies' future performance based on the information that they gathered. The evidence will show that the Galleon analysts dug up this information and used it to paint a picture of a company, a mosaic composed of all different bits and pieces of information gathered which the analysts then used to make predictions about the company's likely future performance. You will see this information. The evidence will show that Galleon's analysts studied the industry as a whole, understand how a particular company might fit in, and to understand how advancing one company might affect others in the industry. For example, if the analyst wanted to learn about a company like Intel, he or she would research Intel's competitors in the market, in the chip market. It would also research the companies that supplied Intel with materials that it uses to make chips. This is known as channel-checking. And they would research the company -- computer makers who buy SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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61 1395raj3 Opening - Mr. Dowd Intel chips to put in their machines. That is what Galleon's analysts did for a living. It is what Raj did for a living. It is what he thought about and talked about day, all day, every day. It is what his investors hired him to do and it is perfectly proper. They would analyze companies' public statements and regulatory filings with the SEC. He would speak to other analysts and investors. They would receive sell-side analyst reports from the large investment banking institutions which handled and executed the trades for Galleon. They hired professional research consultants to lend their expertise in particular fields as you will hear from Mr. Kumar. These consultants might provide information about matters requiring special expertise like foreign markets and new products. You will see these reports and hear the government suggest they were done to paper the file. The evidence will show these reports were done in real-time by real analysts doing real hard work to find the public data. Indeed, under the Galleon system these records could not be destroyed and manipulated. They were all maintained by a third-party vendor. Galleon analysts, and Raj himself, would also gather information by questioning executives from the companies themselves. The last point is the most important because the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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62 1395raj3 Opening - Mr. Dowd government is going to suggest that there is something wrong about talking to a corporate executive about his or her business. That's not the case. Talking to company officials to gather information is proper and it happens every day, it is a common place and essential part of the research process. These company executives are sophisticated people, they are aware of the law and of their own fiduciary duties to their employers and shareholders. They know where the line is and what they can and cannot say about their business. Raj's fiduciary obligations were to his investors. Raj assumed and was entitled to assume that if a corporate executive was sharing information, the corporate executive was permitted to do so and was sharing it with other analysts who asked the same questions. The evidence will show that Raj never had any reason to suspect that any of the people he talked to was breaching a duty or disclosing information that he or she was not permitted to disclose, another essential element of insider trading, and you will find it lacking here. All of this activity is common place, proper and beneficial. It is how professional money managers make the best decisions that the money their investors have entrusted to them. It is how companies sell their stock and raise capital to grow their businesses and hire new workers. That's how information becomes disseminated and how stock prices come to SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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63 1395raj3 Opening - Mr. Dowd accurately reflect the true value of a company. Ultimately, the point of all of this exhaustive and expensive research was to help Galleon's portfolio managers, like Raj, make the best decision about how to invest in stocks. Raj, therefore, encouraged extensive communication within Galleon itself to make sure everyone had the benefit of everyone else's hard work. Galleon had morning meetings every day with his portfolio managers, analysts and traders which was open to investors and even potential investors. The point of this meeting was to discuss and test investment ideas, share information that analysts gathered. He held afternoon meetings with his technology sector analysts getting even more detail about the research. And Raj and his analysts would meet multiple times a day during earning season and around major events. Analysts predictions and recommendations were tested extensively. Analysts were asked probing questions and were required to defend their views. Galleon invested in a lot of stocks over the years. Raj and other Galleon portfolio managers traded stock at a dizzying pace and in enormous volumes, sometimes placing thousands of trades, up to 54 million shares a day. The volume is important because it puts the government's allegations in perspective. The trades at issue in this case represent about one percent of all the trades that Raj placed during the relevant period. To put it in perspective, these rates did SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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64 1395raj3 Opening - Mr. Dowd nothing to increase his returns. In fact, as you will learn, RAJ lost money on some of these trades the government claims were based on inside information. If that sounds like it doesn't make any sense, that's because it doesn't make any sense. And the evidence will show that despite their best efforts, Galleon's analysts and portfolio managers were not always right about their stock picks -- which is what not what you would think if they did have inside information. In fact, they were right only about 55 percent of the time. That's because picking stocks is all about predicting the future and even the best forecasters can't be right 100 percent of the time unless they're cheating. And the evidence will show that Raj did not cheat and did not get the kind of returns that cheaters get. When you see and hear all of the evidence you will see that insider trading is not the reason Raj was successful. Raj was successful because of his knowledge and skill and hard work. Let me spend a few minutes talking to you about the wiretaps. The government said that you are going to hear tape recordings of Raj's own words. These are telephone conversations the government recorded without his knowledge. What do these taped conversations show? They show Raj talking about work. Not too surprising. For him work means talking SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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65 1395raj3 Opening - Mr. Dowd and listening to others in the trade among stocks. That's his job, to buy and sell stocks. Clients of Galleon, investment and retirement plans of universities, companies, individuals who trusted their money to him and expected him, who invested wisely for them by buying and selling stocks and making a profit for them. They expected him to do his homework. And he did. In order to do that Raj had assembled a great team of research analysts, traders and portfolio managers who studied the stock market and invested clients' money. But the stock market reacts to a lot of things and one of those things are investors' expectations about how a particular company is doing. If brokers or traders or investors around the country think that a company is doing well, then they'll be buying the stock of that company and the price will go up. Similarly, if they think the company is not doing well, or at least not as well as the market expects, then they'll become sellers and the price will go down. The person running a hedge fund, a mutual fund or any serious investor needs to know what the market's expectations are about a company before deciding whether to invest in it. How do they find out what those expectations are? One way is talking to the other people in the investment companies to learn what the research analysis shows, to learn what they've been hearing, to learn are what the stocks are they've been SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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66 1395raj3 Opening - Mr. Dowd buying and selling. A portfolio manager needs to talk to these people and engage what is out there in the market and what others have heard about a company. The government wants you to think that these conversations show something illegal but the evidence will show they're not. As you listen to the conversations make sure you focus on the context. You really can't evaluate a conversation without understanding the context. The government is going to play just snippets of these calls. We will provide the context to you so you get the full picture. Some are Raj's conversations, especially the conversations with his brother, Rengan, and with Danielle Chiesi are offensive and they're careless. Some of them make no sense. Some of them include language you might hear in an NFL locker room. You will not like some of what you hear but this distasteful language is not evidence of a crime and the evidence will show the information discussed in these calls was public. When you listen for the context of these conversations, listen for the relationship between the participants. Think of your own telephone conversations -- you talk differently to different people. The people you know there might be more humor, kidding around or just general shooting the breeze. With others, particularly those in the business you are in, you may have short conversations using short terms, everyday terms in your business. These recorded SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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67 1395raj3 Opening - Mr. Dowd conversations reveal all of that. They show people that use terms and expressions that the government is trying to paint negatively, like someone using the term source which is a term that's commonly used on Wall Street to refer to wherever the information came from. It doesn't mean something is illegal. The evidence will show that a source can be almost anyone such as an analyst within Galleon or someone within the investor relations department of a company whose job it is to give out information to investors about how a company is doing. As you listen to the conversations, think of the motivation of why people are calling Raj. The evidence will show that Galleon was well-known for having the best research analysts on technology companies so other investment managers would call Raj to try to find out what he was buying or selling because they wanted to follow him. These people would sometimes try to make it sound that they have new information, to tell him of other companies so that he will share his knowledge with them, but in reality what they're telling him is already out there in the market and Raj has already heard. Sometimes the evidence will show people will exaggerate what they know to make themselves sound important to Raj. The evidence will show that some of Raj's friends who have not been as successful as he has been will sometimes do that. For example, you will hear conversations in this case between a government witness, Ali Far, and Raj, in which Far SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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68 1395raj3 Opening - Mr. Dowd lied. Now, Mr. Streeter didn't say anything about Ali Far, did he? He didn't mention him. These are very serious accusations against Raj by Ali Far but you are going to hear Far made up the fabrications with Raj, he fabricated what he said to Raj. That's why you have to be careful when you listen to these conversations. And he made up sources that he did not have. He has now confessed to all of that and he will confess again from that witness stand. Sometimes people might even deliberately mislead him to try to get him going in the wrong direction on a stock because it will help their position in a stock. So, listen to these conversations carefully, consider the context, the people involved, their relationship to Raj and their motivation because all these things are important to understanding a conversation. Don't assume that just because people are talking about a stock, are trying to find out more information about it, that what they're doing is illegal or improper. The government would like you to assume that but the evidence will show that is not the case. And consider these conversations from Raj's perspective. As I said earlier, it is helpful for him to hear what other people in the market are saying. That doesn't mean he is accepting what they say. He is trying to gauge the market's expectations because one more piece of data to consider in evaluating an investment for his clients. So, he SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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69 1395raj3 Opening - Mr. Dowd needs to get some sense of the market and he has these frequent conversations. The evidence will show that he is not revealing any inside information during these conversations and he is entitled to believe the people he is talking to are not either and they're not breaking the law about what they say to him. So, as you listen to the recorded conversations, kindly keep that in mind. Now we will talk about the cooperators. The government will present much of its case through so-called cooperating witnesses. For each one of these government witnesses here, because they committed their own crimes for which they were not required to plead, each of them is facing 25 years or more in prison but none of them have been sentenced yet. So, each of these witnesses is on a leash and the prosecutor is at the other end of that leash. The prosecutor holds the key to the jail house for each one them. Whether they go to jail, for how long, depends on whether the prosecutor is happy with their testimony against Raj. We will show you the agreements. It must be to his satisfaction. Despite anything these people say here in court, the evidence will show that none of them ever committed any crimes with Raj. The evidence will show that their testimony about Raj is false and that they testified falsely in order to satisfy the government and save their own skins. Let's talk about those cooperators and the testimony SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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70 1395raj3 Opening - Mr. Dowd they'll give. Anil Kumar testified that between 2004 and 2009 he gave Raj material nonpublic information about companies including ATI, AMD, Business Objects, eBay, Cisco, Samsung and Spansion. But who is Anil Kumar? Kumar was a senior partner at a consulting firm of McKinsey & Company. In the late 1990s, Kumar served McKinsey in a senior position for five years in India as and was expert on emerging Indian markets and in South Asia. The government claims that he conspired with Raj from 2003 to 2009 to obtain material nonpublic information from his McKinsey clients to trade stock based on that information. Kumar claims that he was paid by his college classmate and friend, Raj, to give Raj inside information. The evidence will show that the information Kumar shared with Raj is public information. And the evidence will show that the payments Kumar received from Raj were honest payments, on the record, for valuable consulting work. The evidence will show that Kumar was honestly and openly paid for consulting services that he provided to Galleon for the Indian market from 2003 to 2009. The records of Galleon and its brokers will show that Kumar was paid consulting fees for his advice and guidance in the Indian and South Asian investment markets. But he never shared these consulting fees with his McKinsey partners. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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71 1395raj3 Opening - Mr. Dowd Instead he hid them in shell companies in overseas bank accounts and he failed to report these consulting fees on his tax returns to the Internal Revenue Service. The records will show that Kumar has received a pass from the prosecutors for all of these frauds on his partners, the IRS and others. The prosecutors have agreed that nothing he says about these crimes -- and he will say something about these crimes -- his own crimes can be used against him. He told the Court -- he told this Court and the prosecutors, he will tell you that Raj made him do it. The evidence will show that claim is a monstrous lie and it is the Galleon records, Raj's company -- it is the Galleon records and the brokerage records and the subpoenaed records from McKinsey and Kumar which will expose his lie and his fraud. The evidence will show that Raj, Galleon, and Galleon's brokers kept these records from their dealings with Kumar because they have nothing to hide. Kumar was the one with something to hide. He was moonlighting from his McKinsey partners and he was hiding his income from the IRS. And now he is trying to pass the blame to Raj in order to get a free pass from the government. The government wants you to believe that Kumar was Raj's mole inside McKinsey. Raj helped Kumar find other employment when he wanted to leave McKinsey. Raj even gave him SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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72 1395raj3 Opening - Mr. Dowd money to manage at Galleon. The evidence will show that between 2007 and 2008 Kumar managed money in a Galleon portfolio known as the India Book which was part of a group of portfolios called Galleon International. But Kumar's performances as portfolio manager was dismal and the India Book lost money. If Kumar was a source of information about McKinsey's clients for Raj, why would Raj help him leave McKinsey? It makes no sense. And if Kumar had all of this inside information, why did his Galleon portfolio lose so much money? That makes no sense either. What does make sense is why Kumar is testifying against Raj now. Anil Kumar has committed five years of tax fraud, five years of fraud on his McKinsey partners and other frauds you will see all unrelated to Raj, and he covered up his years of tax evasion and fraud. He is now facing 25 years in prison and the only way out is for him to testify to the prosecutor's satisfaction against Raj. Let's review the stocks that Anil Kumar claimed he helped Raj on. ATI is a company that makes graphic chips for computers. On July 24, 2006, ATI announced it was being acquired by another computer chip company, Advanced Micro Devices, or AMD. AMD makes a different kind of computer chip called a microprocessor. Microprocessors are the brains that run personal computers. AMD has about 20 percent of the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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73 1395raj3 Opening - Mr. Dowd microprocessor market and competes with Intel which has 80 percent of the market. ATI was valuable because its chips could put graphics up on your computer screen. The chips made by AMD and Intel did not have that capability. Kumar, in his capacity as consultant at McKinsey, advised on the acquisition of ATI. Indeed, it was McKinsey's idea that AMD acquire ATI. Kumar now claims that he provided Raj with information about AMD's plan to acquire ATI beginning in March 2006. He said that under oath in this court house before Judge Denny Chin. Another cooperating witness named Adam Smith claims that he separately tipped Raj about AMD's plans to acquire ATI in May of 2006. At the time of the alleged tip Smith was a Galleon analyst and portfolio manager responsible for covering ATI. We will talk about Smith in more detail later. The evidence will show that both these accusations are false. The evidence will show that Raj's trading in ATI from March to July 2006 was based on Galleon's expert analysis and research of public information including -- including -- the analysis of Adam Smith. The evidence will show that ATI was a cheap stock for a valuable company. There were two companies that made these graphic chips, one was called NVIDIA, which you will hear about later, SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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74 1395raj3 Opening - Mr. Dowd and the other was ATI. And the big guys wanted these chips so that's what made ATI valuable. Raj, as the records of Galleon will show, built a core long position of stock based on his view that the stock was undervalued, and he bought and sold the stock around that core long position throughout the period of the alleged conspiracy. The evidence will show that Raj did not simply accumulate the stock in anticipation of the acquisition as the government claims. The evidence will show that the Raj didn't believe there would be any acquisition. Let's talk about Kumar and this acquisition. Kumar, as I said, has already stated under oath to this Court and he will tell you that he told Raj about the acquisition of ATI in March 2008 before the deal was public. But the evidence will show that there was no deal from March to May 2006. And the evidence will show there was no deal at the end of May 2006 which means Kumar made up a story to save his own neck. There was no deal. The evidence will also show that by July 12th, 2006, the chief executive officer of AMD was telling large investors that there would be a deal before the deal was formally announced on July 24th. We will show you the e-mail that says that which means the deal was public before it was announced. And it was public, made public by the CEO, not some rumor. This was the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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75 1395raj3 Opening - Mr. Dowd head guy buying ATI. The evidence will show that the investors didn't like the idea. They were telling the CEO of AMD it was too much for AMD to swallow and that AMD would take on too much debt. That was Raj's reaction too. Kumar told the FBI that when he told Raj about the deal Raj did not believe it. Raj said it was crazy for AMD to acquire ATI. But, Raj was buying ATI stock for other reasons. We will show you the research record including the analysis and communications of Adam Smith. You will see that Galleon's analysts including Smith did not believe that AMD was financially capable of acquiring ATI. Although they recognize that ATI was a potential acquisition target, they thought Intel would be the acquirer because they're bigger. And you will see that Galleon got it both right and wrong. They were right that the stock was undervalued and a good investment but they were wrong about AMD's intentions because AMD did in fact buy ATI. But, as you will see in our next chapter, AMD incurred too much debt when it bought ATI and later had to sell its manufacturing facilities to unload some $3 billion in debt. We will talk about Smith for a minute. Smith claims he was tipped by a source at Morgan Stanley and he tipped Raj. Smith's own written analysis at the time contradicts what he is going to testify to in this case. Smith didn't believe AMD would buy ATI. He thought ATI was an SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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76 1395raj3 Opening - Mr. Dowd attractive stock because of its own price. Raj's trading pattern after the alleged made tip was inconsistent with the tip because he was selling the stock. In fact, Raj sold millions of shares of ATI between March and July 2006. That's not what you do when you have acquired inside information that a company is going to be acquired. Now let's talk about AMD and what you will come to learn is the Fab Lite deal. As I mentioned before, AMD is a company that makes microprocessors and it competes with Intel. On October 7, 2008, AMD announced that it was selling its fabrication facilities to a sovereign wealth fund controlled by the government of Abu Dhabi called Mubadala, or ADIC, which is short for Abu Dhabi Investment Council. That is what is referred to as the asset lite or Fab Lite deal -- Fab Lite being a shorthand way to refer to fabrication facilities that make the chips. Those facilities are what AMD was selling to Mubadala. So, there is three parties to the deal. AMD had the debt and the fabrication facilities, Mubadala had the deep pockets, and I.B.M. provided the technology necessary to process the manufacturing of the chips. The idea was for AMD to sell its manufacturing facilities to Mubadala in return for cash, thus getting rid of debt and cleaning up its balance sheet. Kumar, in his capacity SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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77 1395raj3 Opening - Mr. Dowd as McKinsey, advised AMD of the Fab Lite strategy. Kumar will testify that he tipped Raj about the Fab Lite strategy before it was formally announced on October 7, 2008. The evidence will show that Kumar provided information that was public. The evidence will show that Raj, one, already knew about the Fab Lite deal, was already building a long position in AMD stock before he ever talked to Kumar about it because he was familiar with the public information and thought the Fab Lite deal would be good for AMD. Raj had followed AMD for years, it was a company which was his area of expertise. In fact, Raj was such an expert on AMD that Mubadala, AMD's partner in this deal, consulted Raj in June 2008 about his interest in AMD. The evidence will show that Mubadala consulted Raj because Mubadala already owned 8 percent of AMD before the Fab Lite deal ever happened and it wanted Raj's views on AMD and the Fab Lite strategy that it was considering. You will see the PowerPoint presentation Raj made to them about the Fab Lite strategy. The evidence will show that Mubadala imposed no duty of confidence on Raj and placed no restriction on his ability to trade AMD. The evidence will show that the family deal was public before any of these alleged tips. The Fab Lite deal had been part of the public chatter, analysts reports and financial press for a year as far back as SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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78 1395raj3 Opening - Mr. Dowd April 2007. AMD had told the world about the Fab Lite strategy and the implementation strategy. Nothing secret here. AMD itself made public reports that it was pursuing and implementing such a strategy. The government is going to play for you a telephone conversation including Raj and Kumar on August 15th, 2008 in which Kumar says the parties to the Fab Lite deal have shaken hands but the information was already public. Raj knew it. Anyone who paid attention knew it. And in fact Kumar knew it. And so did his colleagues at McKinsey because on the same day, August 15th, one of Kumar's McKinsey colleagues sent an internal e-mail saying that the agreement was known in the industry. It was known in the industry because AMD was talking about it promoting it publicly and those comments were reported in the press and industry publications. For example, on July 28, 2008 -- remember the announcement was in October -- when an AMD spokesman said we see the end point and it is a fair assumption to say we have begun implementing the program. That's no rumor. That's coming right from the horse's mouth. There is no question that AMD was promoting the spinoff deal on the market and the press resulting in all the available information on the deal. The evidence will show that all of this public information about the Fab Lite deal was factored into Galleon's expert analysis of the stock and that Raj traded the stock based on this SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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79 1395raj3 Opening - Mr. Dowd analysis of the public information. The evidence will show Raj knew that Fab Lite was a done deal before the supposed tips. The evidence will show the timing of the deal was also public. Information in public reports put execution of this strategy in the third quarter of 2008 before any alleged tips. The CEO of AMD said the deal would close on September 15th. Lehman Brothers reported it would close on September 30. Kumar thought it would close in October. The government is trying to split hairs but the evidence shows the timing of the deal was public. The evidence will also show that Kumar traded AMD in the India Book portfolio that he was managing for Galleon. Raj had a right to assume that Kumar was operating on public information. The government is going to play you some other calls from a woman by the name of Danielle Chiesi which I mentioned earlier. She's not going to testify in this case but you will hear a lot of her in the calls the government is going to play. She was a hedge fund manager at New Castle. Ms. Chiesi claimed to be a friend and supporter of AMD and its chief executive officers Hector Ruiz. As you will hear, Ms. Chiesi's chief claim to fame was to talk, gossip and exaggerate her own importance in order to impress others and insinuate herself into a transaction. The evidence will show that she would aggressively say anything, even lie to all her SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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80 1395raj3 Opening - Mr. Dowd friends, including Raj. The evidence will show that Hector Ruiz, chief executive officer of AMD and Bob Moffat, senior vice president of I.B.M., were using Chiesi as a go between to get the deal done. They knew she was a hedge fund manager of New Castle and they were talking to her about the deal. But they did not impose any confidentiality on her. You will hear the conversation she had with hector Ruiz. Hector told her nothing of any significance about this deal beyond the parameters which were already public. You hear the conversations she had with Bob Moffat, senior vice president of I.B.M. The evidence will show that Ms. Chiesi could not even comprehend what Bob Moffat said much less communicate what Moffat said beyond describing that the deal was complicated -which the entire world knew. Even her boss, Mark Kurland, who listened in on the calls, could not comprehend what Moffat was saying. Indeed, Moffat was struggling to understand what he was saying. This is why all you hear in the intercepted calls between Chiesi, Ruiz, Moffat, Kurland and Raj was just a lot of self-promotion and gibberish. If you listen carefully, no inside information is ever conveyed by Ms. Chiesi to Raj, it is just a lot of drama. Raj did what he was going to do regardless of anything Ms. Chiesi said or did and he did it on his own experience and research. The evidence will show between August 1 and August SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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81 1395raj3 Opening - Mr. Dowd 25th, 2008 Raj built a very long position of 18 million shares and he told Chiesi on August 25th that he was 10 million long and going to 25 million based on his own research. The government will also play a conversation between Raj and his brother that Mr. Streeter mentioned. It is an unattractive conversation. As you will hear and see, no inside information was conveyed and nothing came of the conversation. When you take all the wires together you will see that Raj listens, plays along with people, tries to make them feel important, and then goes back to being a professional trader. Listen carefully. Sometimes he sounds uninterested in what the other person is saying or the other person is going on about something unimportant but he is always polite. Bottom line, from these intercepts no inside information was ever conveyed by Chiesi to Raj. How can you tell for sure that Raj had no material nonpublic information? How do you know for sure that he had no unfair advantage over other investors? He got it wrong. He got it wrong and lost millions of dollars. He lost $53 million in AMD and he didn't lose it because of the recession, he lost it because AMD had pumped this stock to the point that it was already embedded. The market concluded all they were doing was cleaning up their balance sheet and it didn't do a thing for the company. It didn't grow the company. That's what happened here. It wasn't the recession. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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82 1395raj3 Opening - Mr. Dowd You can't blame the recession. You can blame AMD and their chief executive officer for promoting. Kumar will also testify that he gave Raj inside information about plans about a PC maker Hewlett Packard to use AMD chips in certain lines of its servers before these plans were announced on February 25th, 2004 and February 14th, 2005. Raj did not trade in AMD stock for nearly a month prior to the announcement on February 25th. He had no position in AMD stock going into the announcement. That's what the record shows. This is totally inconsistent with the claim that he had inside information about this deal. Raj was shorting the stock which means he was betting that it would go down prior to the second announcement on February 14th, meaning he was betting the stock would go down. This announcement should make the stock go up. Again, it is totally inconsistent with the idea that he had advance notice of this piece of good news about AMD. These deals were already public, they were widely discussed, respected and published analysis, news articles and industry publications before the official company announcement. Kumar said he tipped Raj on Business Objects, a French company which makes computer software. Business Objects was also a McKinsey client. Kumar is going to testify that he told Raj that Business Objects was having financial difficulties in the third quarter of 2007 before the company announced its disappointing earnings on October 7th. The evidence will show SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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83 1395raj3 Opening - Mr. Dowd that it is with AMD Kumar traded in Business Objects in the Indian book for the polio that he managed at Galleon. The evidence will show that Raj was shorting the stock of Business Objects meaning he was expecting it to go down based upon recommendations of Galleon's analyst and publicly available information that Business Objects' "financials were deteriorating." The same day that Business Objects announced disappointing earnings it also announced it was being acquired by a company called SAP which sent its stock price soaring. Raj lost money on the short position when SAP acquired Business Objects. The allegation that Kumar provided Raj with inside information regarding Business Objects makes no sense. It would mean that he provided inside information about the earnings but not about SAP. But Kumar told the government that he generally didn't know anything about companies' earnings but he was knowledgeable about strategic transactions such as acquisitions. And he would have you believe the opposite about Business Objects. It simply makes no sense except it is another attempt by Kumar to cover and divert attention from his hiding his consulting fees from his partners and the IRS. Cisco-EMC. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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84 Opening - Mr. Dowd Cisco is a company which makes networking equipment. Kumar is going to testify he conspired with Raj to obtain material nonpublic information about Cisco's potential acquisition of EMC in July and August 2008. You will hear the telephone conversations, they're nothing but chatter. You will hear no inside information on those telephone calls. Kumar testified he has also conspired on the Cisco Starent acquisition and this is where he mentioned the prepaid phone. Folks, when you have got a liar like Kumar, you need some corroboration and that is a complete falsehood. There is no prepaid phone, there wasn't any prepaid phone, he just made it up. Raj, he said, he got tipped that Cisco was going to buy Starent. Raj's investment in Starent was based upon the fact they had a top long position that Starent was a good company and was doing well. There was also a lot of public speculation about an acquisition. Here Cisco was a client of McKinsey so who would know better as to whether there was going to be an acquisition? And it was Kumar's client -- that was McKinsey's client. So it is just another blame Raj story by Kumar. Adam Smith will testify he tipped Raj about the acquisition of Starent but the evidence will show Raj was building a long position in Starent in August and September long before the alleged tips and his position was based on SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 1395raj3

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85 1395raj3 Opening - Mr. Dowd fundamental research and analysis. The evidence will show that there was extensive public chatter about Starent. And you will hear Smith's own voice that this accusation with a lie. Smith tried a secret telephone tape recording to get his former trader, Raj's trader Ian Horowitz, to confirm that they had inside information on Starent and you will hear Horowitz reject that suggestion. You will hear Horowitz confirm expert fundamental research that supported Raj's trading in Starent. That tape recording, that secret tape recording by Smith blew up on him. eBay, which is a company that cooperates an online auction site, eBay was another McKinsey client. Kumar is going to testify that he told Raj about eBay's plan to lay off a portion of its work force before the layoff was announced on October 6. Ladies and gentlemen, a reduction in force including the precise number had been in the press weeks and months before. Kumar's information was simply public information. Samsung, a diverse technology company, Korean technology company which makes flat panel TVs, mobile telephones, memory chips, they were a client of McKinsey. Kumar is going to testify he tipped Raj about Samsung's plan to acquire an Israeli memory chip company called Sandisk. And they will play a recorded telephone call -- Mr. Streeter didn't mention this one -- for you where Kumar tells Raj he spoke to SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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86 1395raj3 Opening - Mr. Dowd his friends in Korea who said they were keen on acquiring that company. Kumar also tells Raj that the executives at the Korean company have visited with the target company in Israel. But, the evidence will show before the exposing tip of Kumar that Samsung had publicly announced its offer to buy Sandisk in September 2008. That is commonly referred to as a hostile takeover. It was public. The companies themselves published the facts before Raj spoke to Kumar. The fact that Samsung executives had visited Israel where Sandisk was created was also public information. Raj lost money on the Sandisk trading. Spansion, which is a company which makes memory chips for computers, it was a McKinsey client. Kumar will testify that in May 2008 he provided Raj with information about Reliance and a deal sheet. But he didn't have any relationship with Reliance, there was no breach of fiduciary duty here. And then Mr. Streeter mentioned a recorded call between Raj and two of his colleagues. All it shows is that there was no breach of fiduciary duty, Raj treated the information he received as confidential so that his colleagues wouldn't trade on it and there was no term sheet for an acquisition by reliance of Spansion and there was no e-mail trail ever created. What Raj and his colleagues were talking about is the crossover. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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87 Opening - Mr. Dowd That was a new fund that they had to account to their investors so they kept track, on paper, of ideas that they had and that's what Raj was referring to. Now, let me turn to Danielle Chiesi for a moment. the government alleges that Ms. Chiesi tipped Raj about Akamai, it is a company that makes technology to route and control the internet traffic, prevent congestion in times of high usage. The government claims that Raj conspired with her and engaged in inside information. The evidence will show that the government has it wrong on both counts. First, was a July 30 announcement. It was publicly known in the market that Akamai was facing new competition and pricing pressure and this was going to have an adverse effect on their earnings. Analysts were already reporting that Akamai was likely to have a negative quarter and Raj had a significant short position, meaning he thought the stock would go down based upon the analysis and fundamental research from available data points, channel-checks, competitors and sell-side reports. We will show it all to you. Ms. Chiesi will testify in this case. The evidence shows that Chiesi had no inside information. The only information Chiesi provided was public information. And then the government alleges there was supposed potential acquisition of Akamai in September 2008. Again, they didn't do their homework. You will hear SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 1395raj3

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88 1395raj3 Opening - Mr. Dowd the Akamai witness. There were no negotiations between Akamai and the other company who acquired Akamai in 2008. That's what the government's witness will say. I.B.M., as you know, is the leading manufacturer of computer hardware -- personal computers, laptops and mainframes. Raj is alleged to have conspired with Ms. Chiesi to obtain inside information on I.B.M.'s quarterly earnings for the second and third quarters of 2008 before they were formally announced on July 17th. Once again, the government is wrong. Raj had a hell of a long position on I.B.M. consistent with his expert analysis. You will see it. There is simply no evidence at all that Chiesi tipped Raj about the quarter's earnings. The only conversation you will hear relevant to the July earnings event occurred after the July 17th public announcement by I.B.M. Once again, you have to do your homework. Regarding the October 16th earnings announcement, the evidence will show Chiesi communicated no material nonpublic information to Raj. Raj's short position believing the stock would drop was based on public information and Galleon research Let's talk about Rajiv Goel -- we pronounce it Goel. He is going to testify that Raj -- he gave Raj material nonpublic information he obtained from his employer Intel. He testified he gave Raj inside information about Intel's decision to invest in a company called Clearwire. But who is Rajiv SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

89 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 1395raj3 Goel? Opening - Mr. Dowd Rajiv Goel has committed a crime of filing false tax returns unrelated to Raj and is now facing 25 years in prison, and the only way out is for him to testify to the prosecutor's satisfaction against Raj. Goel was a classmate and very close friend of Raj from business school. He remained a close friend over the years and they would talk on the phone frequently. He was like a brother to Raj. In 2005, Goel asked Raj for a loan to help him for the downpayment of his house. Raj gave him $100,000. Goel did nothing in return. In 2006, Goel called Raj and told him his father was sick in a hospital over in India. Goel was sleeping on the floor of the hospital and was very concerned about his father and about the condition of his father's apartment over there which needed a lot of repairs. He asked Raj for help. Raj helped him out by giving him $500,000. Goel did nothing in return. Goel asked Raj to help him manage his money by making stock trades in his account at Schwab because Goel didn't qualify to be an investor at Galleon. Goel gave him a password to a Schwab account, Raj agreed and made some stock trades for him. Goel started working at Intel in 2000. Goel did not have access to inside information. Goel was not the chief SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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90 1395raj3 Opening - Mr. Dowd financial officer of Intel nor did he work in a part of the company that assembled and released financial information. Goel actually worked in a separate Intel subsidiary by the name of Intel Capital and he was not a senior person there. Therefore, when Goel discussed Intel, Raj had no reason to believe that Goel was telling him any inside financial information or anything else that constituted inside information. The evidence will confirm that Goel had no inside information. Goel was unhappy at Intel for years. Raj helped him on numerous occasions to find other work. He was an inside source, why help him leave? It makes no sense. Goel had a tax problem. He did not report the account where he kept the money that Raj gave him so he cut a deal with the government but you will see his testimony doesn't stand up. Let's talk about Clearwire first. Mr. Streeter didn't mention Clearwire but we are charged with Clearwire so I'm going to ask your indulgence to cover what we are charged with here Clearwire is a company that owns a telecommunications company called WiMax. You are possibly familiar with it as the 4G technology that many newer cell phones and other wireless devices use. The government alleges that Raj conspired and engaged with Goel to obtain inside information about a joint venture between Clearwire and Sprint, and about Intel Capital's SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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91 1395raj3 Opening - Mr. Dowd investment in that joint venture before it was announced on May 7, 2008. The evidence will show that prior to any information being passed by Goel, Intel had invested $620 million in Clearwire. That was on the public record. You will see the SEC filings. The information provided by Goel had already been announced publicly by Clearwire, Sprint and Intel. Then, in early March -- remember the announcement date is May -- in early March 2008 Intel Capital itself held a public conference for investors and announced its interest in making an investment in the Clearwire joint venture at an analyst conference attended by Galleon and many other hedge funds and investors. And analysts who worked for Raj attended the conference. Goel did not attend or participate in the conference. The analysts and other sophisticated investors, including Raj, concluded that Intel was going to invest another $1 billion in Clearwire. The March 25th, 2008 edition of The Wall Street Journal said that Intel was investing another $1 billion in the deal. The information you will hear Mr. Goel tell Raj shows that Goel does not know details about Intel's investment or the deal itself. (Continued on next page) SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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92 Opening - Mr. Dowd MR. DOWD: (Continuing) let's talk about the earnings that Mr. Streeter talked about. Raj is alleged to have conspired and engaged with Goel to obtain inside information about Intel's quarterly earnings before they were announced on April 17, 2007. The government will present evidence that Goel contacted Raj on a telephone on April 16, 2007, the day before earnings were announced. The evidence shows that prior to any calls with Goel Raj had already adopted a trading strategy based on public information. Intel had announced about a major upgrade of an existing product line and the launch of a new product line. You will see those announcements and how they correspond with Raj's trading. Raj had followed Intel for 25 years, long before Goel went to work there. He did not have -- Goel did not have any inside financial information about Intel. And Raj had no reason to believe that he did. Now let me talk to you about another cooperator here that's briefly mentioned. And I deign to understand why she was only briefly mentioned. Cooperating witness Roomy Khan. And, again, I hope you'll indulge me and appreciate that I've got to address this. We're charged with Raj accused by Roomy Khan. Apparently, the government didn't want to dignify it and I understand why. So, who is Roomy Khan? Roomy Khan is a SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 1399raj4

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93 1399raj4 Opening - Mr. Dowd twice-convicted fraudster, obstructer of justice, and a professional liar who plays the government like a violin. She's facing at least 25 years and her only chance for less time is to testify to the prosecutor's satisfaction against Raj. Sadly, ladies and gentlemen, she is just a woman in a heap of personal trouble who has told so many lies to the government that they'll probably spend more time, when they put her on the stand, telling you about how she lied to them time, after time, after time about herself and about Raj. They'll have her tell you that now she's finally telling you the truth and ask you to believe her. The evidence will show she is and always has been untruthful. In 1999, after she was discharged from Intel, Khan made similar false accusations against Raj. She fabricated a claim that Raj had given her -- that she had given Raj inside information about Intel. The FBI conducted a full investigation and could not find any trading by Raj or any benefit given to Roomy by Raj. The case was closed. Raj hired her in his California office unaware that she had committed these crimes or had any dealings with the FBI. But he had to fire her because she was enriching herself by trading in her own account, a violation of the Galleon rules. In 2005 to 2007 the period in which the government SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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94 1399raj4 Opening - Mr. Dowd says Roomy was giving material nonpublic information to Raj on three stocks you'll hear about -- Polycom, Google, and Hilton -- you'll hear that she was desperately trying get a job with Raj to the point of annoyance. She's pestered him. She wanted to look good to him. But her own words to the FBI candidly reveal that it was never about inside information. That's what she told the government. She didn't give Raj inside information. She told the government the truth in November 2007. But they did not want to hear it. We'll show you the interview. That's confirmed, as you will hear, by the fact that her sources at the three companies either didn't have material nonpublic information to give her, or she received information from the company's investor relations department, a perfectly appropriate source of information. And finally, on Hilton, she simply told them what the entire world knew. Like other crimes, she had to say something to escape her crimes. Let's briefly look at those stocks. First is Google. You're probably familiar with Google. Google runs the internet's leading search engine, operates the Gmail online e-mail system. The government alleges that Raj conspired with Roomy SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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95 1399raj4 Opening - Mr. Dowd Khan to obtain inside information on Google's earnings before they were announced on July 19, 2007. Raj regularly traded Google based on expert fundamental research and public information around the earnings. By July 2007, he had been trading the stock nearly every quarter for years. In July of 2007, one of his expert analysts, based upon public information, predicted a ceiling price of $550. In other words, he recommended that selling Google shares if they reached that price. And Raj did. He followed that advice. When Google hit 550, Raj started to sell. Had nothing to do with Roomy Khan. You're familiar with Hilton, the Hilton Hotel chain. Raj is alleged to have conspired with Roomy Khan to obtain inside information about the Blackstone Group's acquisition of Hilton before it was announced on July 3, 2007. The evidence shows that prior to any tip from Roomy Khan the whole world knew that Hilton was going to be purchased and taken private. Hilton made itself more attractive for a buyer in its public filings and conduct by selling a European operation and eliminating what they call the poison pill, a legal obstacle to being acquired. The volume of trading in Hilton's shares was seven times its normal volume on July 3, 2007, the same day that Raj bought in, only half a day of SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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96 Opening - Mr. Dowd This shows the market anticipated the deal. A professional stock trader like Raj surely can be expected to recognize the obvious. Polycom. This is a company that makes conference telephone equipment. Raj is alleged to have conspired with Roomy Khan to obtain inside information about Polycom's earnings and guidance before they were announced on January 25, 2006 and April 19, 2006. With respect to the January announcement, the evidence shows that before any tip from Roomy Khan, Raj had a long position in Polycom based on his research. He was buying the stock in December of '05 before Khan ever called him. Galleon had an analyst at a Polycom conference the very morning that Roomy called. And what's even worse is that after she called, Raj made no trades. Someone else in Galleon made a trade, but totally unconnected. So had they done their homework, they'd have found that Raj didn't even trade in any event. With respect to the April 19 announcement, Khan claims she told Raj that Polycom would have a good quarter and that earnings would be good. But Raj traded the opposite of this tip. He sold his shares. And Polycom shares went down, following the earnings announcement, just the opposite of what her tip was. So if her tip was inside information, she should have been saying you've got to sell your stock. That's not SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 1399raj4 trading.

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97 1399raj4 Opening - Mr. Dowd what she said. Again, it doesn't make any sense. Now, one fellow they didn't -- one cooperator they didn't mention at all, a fellow name Ali Far, a cooperating witness. I mentioned him a little bit earlier. Let me elaborate. Who is Ali Far? Ali Far was caught by the government paying for inside information in his own hedge fund called Spherix after he left Galleon. He's facing 25 years in prison. And the only way out for him is to testify to the prosecutor's satisfaction. Raj hired Far years before because Far was an engineer and had a deep and strong knowledge of technical products. After working in Galleon as an analyst for approximately four years, Raj decided to give Far a chance to manage money at the company. In 2003, Raj promoted Far to a portfolio manager of Galleon's communications fund. Although Raj gave Far a chance to perform, Far's performance in 2004 and 2005 was the worst of any other technology portfolio manager. He certainly didn't have any inside information, as he now claims he had at Galleon. Raj gave Far another chance to be an analyst and also to help the company build out its business in Asia. Far decided to leave Galleon in 2007 and give it another try, set up his own fund. Raj agreed to invest in the fund. And he did so on the public record, appropriate filings SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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98 1399raj4 Opening - Mr. Dowd and documentation in 2007. You'll hear Far testify about stocks like Atheros, Marvell, Maxim and Broadcom. You'll hear that Far and Raj talked about channel checks and other information each of them had heard in the marketplace about how those companies were doing. But you won't hear -- what you won't hear is any material nonpublic information as to Raj. You'll hear Far admit that he fabricated information he provided to Raj on the same phonecalls during which he claims to have given Raj inside information. You will hear recordings of seven what is known as a consensual call where one party gives consent. The other one doesn't know what's happening. Seven phonecalls that the government had Far place to Raj. The FBI was listening and recording the call. The goal of these calls was Far to get Raj to incriminate himself. But you'll hear that Far never mentioned any of these stocks or anything about inside information when he got Raj on the phone monitored by the FBI. So, you you've got to ask yourself why didn't he. Well, I submit that it would be a fair inference on your part to conclude because he knew Raj wouldn't agree. What other reason could there be? And they tried it seven times. And not once. Not even close. Raj -- Far never gave him any information. Far got caught buying inside information for his own SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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99 1399raj4 Opening - Mr. Dowd fund. So he pointed the finger at Raj. But the proof is in the recordings. There's nothing incriminating about the calls that Far recorded for the FBI. Far has now admitted that much of what he's said in the secretly recorded calls with Raj was fabricated. That's probably why Mr. Streeter didn't say a word to you about it. Atheros, a wireless communications company. Raj is alleged to have conspired with Far to obtain inside information and guidance in quarterly earnings before they were announced on February 2. The evidence will show the numbers were already public. There wasn't any inside information. Broadcom, semiconductor company. Same allegation. The evidence will show Far conveyed just public information. Raj was already short in Broadcom when Far called on January 22. Raj was betting the stock would go down. And in the call he told Far he was short. There is no tip there. There is no inside information. Maxim. Another allegation of conspiracy dealing with earnings and guidance on January 29. The evidence will show the information provided by Far that Maxim would miss the Street's expectation, which the Galleon expert analysis already knew. Raj was already trading based upon public information and analysis of Galleon. Marvell, the same thing. Raj didn't trade at all on SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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100 1399raj4 Opening - Mr. Dowd Marvell at the time. Let's talk about Adam Smith. He was briefly mentioned. The next cooperating witness will testify that he provided Raj with material nonpublic information about ATI, Starent, ICST, Vishay, NVIDIA, and Intersil. Mr. Streeter has already mentioned ATI. I've talked about Starent. Starent is the one recording you will hear that Smith made -- wore a body wire to try to ensnare Ian Horowitz, and it blew up on him. Vishay, NVIDIA, and Intersil. I want to discuss just briefly those stocks. Let's take a closer look at them. Smith is former Galleon portfolio manager whom Raj trusted to conduct his trading legally and ethically, who committed insider trading crimes after he left Galleon. And has admitted to destroying the evidence of his crimes. He's facing 25 years and has to sing off the same sheet of music to avoid incarceration. He was a bright, confident young man who endeared himself to Raj as an analyst by his hard work. Raj promoted him to portfolio manager and entrusted him with a lot of money. Smith claims he did his own research. After he left Galleon, he admitted engaging in insider trading in his own fund and destroying the evidence of his crimes and had this farm in upstate New York. He got caught and started pointing fingers and wearing wires. You will hear the tapes. As I said, it all backfired on Smith. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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101 Opening - Mr. Dowd As to the rest of his accusations, they are refuted by his own analysis and records at Galleon. When he testifies in this court, he's going to have to eat his own reports. ICST is a company that makes semiconductor components. Smith said he tipped Raj in March 2005 on a merger between ICST and IDT before it was announced on June 15. Once again, the evidence shows Raj began buying ICST in February 2005. Once before the merger with IDT. You will hear -- you will hear from Galleon's expert analyst and see his work based on fundamental shoe leather research that anticipated the merger before March 2005. The chief financial of IDT stated publicly before March 2005 that IDT wanted to make an acquisition. The expert analyst at Galleon reported to Raj and predicted that ICST was a likely candidate to be acquired by IDT. Mr. Streeter mentioned Vishay, another company supposedly tipped by Adam Smith that Vishay was going to be acquired. Vishay was never acquired. Vishay was acquiring other companies. So whatever information it was is simply wrong. Had nothing to do with it. NVIDIA. You remember my mentioning NVIDIA. They make graphics chips just like ATI. Raj is alleged to have conspired with Adam Smith about NVIDIA's quarterly earnings in 2008 and 2009. This is going to be an example of where Galleon's incredible records come back to haunt Mr. Smith. He said SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 1399raj4

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102 1399raj4 Opening - Mr. Dowd that -- he said that he tipped Raj. But Raj, in August 2008 -and you will hear some of the conversation with his colleague, Rick Schutte, very senior portfolio manager, director of research at Galleon. Raj and Schutte went to California and they did their own research on NVIDIA. And they talked to the company officials. They talked to engineers, etc. So, the question you've got to ask is: Why is Raj going to California to do his own research on NVIDIA and Smith is supposed to be tipping him off on NVIDIA? It makes no sense whatsoever. Intersil, another semiconductor company. Raj supposedly conspired with Adam Smith to obtain inside information about financial results from 2003 to 2009. But if you compare the trading records -- and we'll show you the trading records -- of Adam Smith and Raj, they don't trade the same. So it makes no sense. The records -- the proof is in the records. Mr. Streeter talked about Rajat Gupta. Goldman Sachs. A great friend of Raj. A member of the board of directors of Goldman Sachs and Procter & Gamble, another stock that wasn't mentioned by Mr. Streeter. Former chairman of McKinsey & Company. He was an investor in Galleon, investor in also the private entity called New Silk Route. Galleon was a big customer of Goldman Sachs and sent a lot of trading business to Goldman. In turn it received the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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103 1399raj4 Opening - Mr. Dowd sell side research of Goldman. Just so you have all the facts. Not afraid of the facts. Just ought to know there's a big relationship between the two. And these two gents have been great friends. The government alleges that Gupta provided Raj with inside information about Goldman Sachs and Proctor & Gamble. The allegations don't hold up. The first allegation has to do with the June 17, 2000 earnings of Goldman Sachs. There is no evidence that Gupta or anyone else tipped Raj about the quarterly earnings. There are no e-mails, IMs, phonecalls between Raj and Gupta referencing Goldman around the time of the announcement. What the evidence does show is that Raj's trading in Goldman, leading up to the June 17 earnings, that is the records of Galleon, was consistent with and based upon Galleon's expert and external analysis of public information about Goldman that they would have strong second quarter results. And that's what he traded on. Berkshire Hathaway. Remember what I told you at the beginning. Be careful here when they give you snippets of information. Be real careful. Make sure you get the whole story. Make sure you get the context. Raj was trading in Goldman around the time of the Berkshire Hathaway. He was long; that is, he was buying Goldman stock consistent with his research. And we'll show you SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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104 1399raj4 Opening - Mr. Dowd the research. And the external analysis predicted the imminent passage of the federal legislation called TARP. You all remember TARP. We had to cough up a load of dough to help save some of these fellows on Wall Street. It was huge. And that would help out the financial firms during the 2008 financial crisis, including Goldman Sachs. Goldman Sachs got ten billion dollars from the taxpayers right at this time. Raj had a Washington firm on the afternoon of September 23 tell him they thought TARP would pass. And that would be good for Goldman Sachs. In addition, Raj bought, on that day, one million shares of what is known as XLF -- that is a bundle of financial stocks in one -- based on the information he got. That's a little different story, isn't it? And this index that attempts to provide investment results that mirror the price and yield performance to the financial select sector of the S&P 500. This investment, like Raj's investment with Goldman, was consistent with buying financial stocks that would likely see a positive impact from the TARP legislation. As I tell you, Goldman thereafter received ten billion taxpayer dollars just the way Raj's firm in Washington had predicted the legislation would pass. December 16 earnings announcement. The government cites two phonecalls as their only support for this allegation SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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105 1399raj4 Opening - Mr. Dowd concerning the December 2008 earnings announcement. Let me just take a second. This is an October 23 call. Goldman's order ends about November 26 -- don't hold me to it. We'll give you the right date. Then they announce about 30 days later, like December 16. So normally a quarter ends and there's a period of time, I think, when they get all their data together. Then they tell the public. So this call is on October, essentially the first month of the quarter -- or the second month of the quarter. Forgive me. The claim is, by Mr. Streeter, he has two calls. One is an unrecorded call with Gupta and one is a recorded call with David Lau. They claim that Raj sold his entire position with Goldman after his call with Gupta on the afternoon of October 23. The evidence will show they do not understand the call. David Lau. David Lau is one of Raj's top guys. He's in Singapore. He's an old friend of his. They went to school together. And they talk about what's happening in the market. And this was not a lovely time in the market. Two events had occurred on October 23. One, a public event. About four thousand of Goldman employees had been laid off. It was in the Wall Street Journal on that morning. A rough calculation, severing some four SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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106 1399raj4 Opening - Mr. Dowd thousand employees and about two hundred thousand per head. That's $800 million that's coming out of Goldman's pocket. Okay. That's number one. Raj knows that. He's read his Wall Street Journal. And he's got a position in Goldman. And then Goldman had an investment in what is known as the International Commerce Bank of China, which announced the day after Raj's call with Gupta, in the morning of October 24, before his call with Lau. Goldman lost one billion dollars. Now, Raj has got a great mind for numbers. And if you do a back-of-the-envelope calculation of the one billion they lost in their shares in the International Commerce Bank of China, it's about two bucks a share. So, what he's talking when you hear that phonecall, what they're talking about is public events. And the hit to Goldman. And when he -- the evidence will be when he learned of a hit of one billion dollars, he closed his position in Goldman. By the way, he didn't make any money. He just got out. Because they were in real deep trouble. If you can imagine taking -- losing a billion, eight hundred million dollars in one day. Even Goldman Sachs can't stand that. That's why he sold. Not what Mr. Streeter said. SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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107 Opening - Mr. Dowd Proctor & Gamble. There's absolutely -- you will not find any evidence or any communications or anything between Mr. Gupta and Raj on Proctor & Gamble. What you will see is the research inside Galleon as to why there ought to be trading. And you'll see that Raj had no position, no trading position in Proctor & Gamble shares. He was short the quarters before. Then, there are a number of stocks dealing with his friends Krish Panu and Chris Chellam. They are old friends and colleagues of Raj. I'm not going to review them all in detail with you because I know that time is pressing here. I want to emphasize the same themes to you. We will show you the research and the analysis and the reasons to support Raj's trading in @Road, in Cavium, PeopleSupport. It's the same as all the other stocks that I've talked about. The same is true of Xilinx which covers three or four quarters. There's just simply no evidence to support the passage of material nonpublic information. AT&T, which they charge. There was no inside information. No inside information. AT&T never thought about acquiring either Citrix or Yahoo. That's what that allegation is all about. A stock called Juniper, which is a network company. All Raj's trading -- supposedly he conspired with a fellow SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300 1399raj4

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108 1399raj4 Opening - Mr. Dowd named Tushar Kothari. Mr. Kothari will testify he never gave inside information. And then Synaptics. The company that makes the touch pad sensors on computers. The information that Raj had was public information and analysis and research. Ladies and gentlemen, I thank you for your patience here in the late afternoon with me. I know this is a big case and a big commitment of your time. We are very grateful for your service and will do our best not to waste your time. There is no way around it. This is a big, complicated case. And we're going to take it on. And we're going to take it on head-on. Mr. Streeter and I have given you a lot of information. Some of that information is complex. I know I had a hard time understanding this business at first. If we work hard enough, I hope we can make it easy for you to understand and clear. As you listen to the evidence in this case, I'd like to repeat a couple things I've said. And that is keep a few things in mind and ask yourself a few simple questions. First, ask yourself: Was the information that Mr. Rajaratnam received already public? As I told you, we're going to prove to you the information at the heart of this case was public. So listen to what you hear in the calls, the information the cooperators SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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109 1399raj4 Opening - Mr. Dowd will say they passed to Raj. They're going to say it's material nonpublic information. We'll prove otherwise. And we have no burden at all. But we'll prove it. Pay close attention to the evidence we show you, the newspaper articles, the company announcements, the public analyst reports, the company conferences. This is where they invest -- invite investors in. Don't forget. Keep an eye on these companies. They're all promoting their stocks. And ask yourself: Was the information already public? Has the company announced it? Has it been reported in the newspaper? Because if the information was public, there is no case here. It's over. Second, ask yourself if the information was material? What does that mean? Was it significant? Was it a big deal? Was it something that would affect your own decision about how to trade the stock if you knew about it? Third, ask yourself: Was there ever an agreement between Mr. Rajaratnam and another person who engaged in insider trading? That is the key question on the conspiracy charges. Cooperators will tell you that there was such an agreement. Look closely at the evidence and evaluate the SOUTHERN DISTRICT REPORTERS, P.C. (212) 805-0300

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110 1399raj4 Opening - Mr. Dowd evidence in light of the cooperators' bias and their incentive to point the finger at Raj. Look at how Raj actually traded. Did he trade in a manner consistent with the agreement to engage in insider trading? Did he trade in close proximity to the alleged tip? Did he trade in a manner that the alleged tip would suggest? Did he trade at all? Ask yourself those three questions: Was it public? Was it material? Was there an agreement to engage in insider trading? I just ask you to use your common sense and apply it to those questions as you hear the evidence. As you know, the government gets to go first. We get to cross-examine their witnesses. And then we have our turn. And I know you will be fair. And I know you will keep an open mind so that you hear all of the evidence, as Judge Holwell has instructed you. And we believe at the end you'll see that Raj never engaged in insider trading, never conspired or agreed with anyone to do it. And you'll see that he's innocent. And I thank you very kindly. THE COURT: Thank you, Mr. Dowd. MR. DOWD: Thank you, your Honor.