McKinsey, Akamai open probes in Galleon scandal

By Gina Keating

LOS ANGELES (Reuters) - McKinsey & Co and Akamai Technologies Inc <AKAM.O> launched investigations on Wednesday into accusations by the U.S. government that some of their employees were linked to the Galleon Group insider-trading scandal.

McKinsey said it was conducting an internal probe to see if senior executive Anil Kumar, who has been charged in the case, had leaked confidential information about clients to Galleon.

Hedge fund Galleon is at the center of a federal investigation that is rocking Silicon Valley and Wall Street. McKinsey said it was cooperating with the government.

Galleon's founder Raj Rajaratnam and four others, plus Kumar, were charged on October 16 with securities fraud and conspiracy.

Advanced Micro Devices <AMD.N> said on Wednesday that it was investigating a report that its former chief executive Hector Ruiz was linked to the Galleon scandal.

The Wall Street Journal reported on Tuesday that Ruiz, now chairman of AMD-affiliated spinoff Globalfoundries, a chip maker, passed on confidential information regarding the spinoff to a hedge fund manager.

Akamai, an Internet content delivery company, said it began its internal probe after federal investigators said an unnamed executive passed on information in 2008 regarding its earnings outlook to Galleon.

"We've offered our assistance to law enforcement authorities in their ongoing investigations. At this time we do not know if any of the claims made in the complaint are true," Akamai's Chief Executive Paul Sagan said after the company announced its quarterly results. This was his first public comment on the case.

"We have begun our own internal investigation. If we are able to determine that somebody in Akamai Technologies has done something wrong, we will take swift and appropriate action."

Intel <INTC.O> said last week that it was reviewing internal policies as a result of insider-trading allegations related to the Galleon case that have been made against one of its executives.

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In McKinsey's case, Kumar, 51, has been accused of sharing inside information with Rajaratnam about pending transactions involving AMD and two Abu Dhabi-based entities.

"We were very surprised and remain concerned by the allegations against Anil Kumar," McKinsey said in a statement.

"We have suspended Mr. Kumar indefinitely pending the results of the internal investigation we have underway and the unfolding legal proceeding."

The U.S. Securities and Exchange Commission and the Department of Justice are investigating the Galleon case.

McKinsey said this was the first time in its 83-year history that a firm member has been charged with securities law violations.

Attorney Charles Clayman, who represents Kumar, said his client was "unaware" of the McKinsey investigation.

Kumar, who was arrested in New York and released on a bond secured by his California home. Clayman said Kumar had been placed on paid leave and that he has denied any wrongdoing related to the Galleon matter.

Federal prosecutors have said that the insider-trading scheme yielded a profit of more than $20 million.

Charged along with Kumar and Rajaratnam were Danielle Chiesi, Mark Kurland, Rajiv Goel, Robert Moffat. Rajaratnam, who has said he is innocent, is free on $100 million bail.

Galleon liquidated most of its $3.7 billion portfolio last week after investors began demanding their money.

(Additional reporting by Ritsuko Ando in New York; Editing by Edwin Chan, Toni Reinhold)

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