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The Insider Trades That Brought Down Raj Rajaratnam

Photo: John Marshall Mantel | The New York Times | Redux

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Another Source Arises

Years later, Rajaratnam convinced an old friend, Anil Kumar, to be his personal consultant. Kumar worked at the prestigious firm McKinsey & Co. and soon he began to funnel secrets about McKinsey’s corporate clients to Rajaratnam.

In return for his expertise, Rajaratnam paid Kumar $500,000 a year. Rajaratnam used offshore accounts and shell companies to conceal the payments to Kumar.

In 2006, Kumar was consulting for Advanced Micro Devices, a microprocessor maker. By attending the company’s strategy meetings, he learned it made a secret bid to acquire graphics chipmaker ATI.

Armed with this information, Rajaratnam was able to buy shares of ATI ahead of the acquisition. When the deal became public, ATI’s stock soared by 25 percent and Rajaratnam cleared $23 million.

Photo: John Marshall Mantel | The New York Times | Redux