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Feds Broaden AMD Insider Trading Case Against Rajaratnam

Federal prosecutors said Tuesday that they would bring new charges against Rajaratnam

Anil Kumar, the former McKinsey & Co director accused of trading insider information about AMD, one of his clients, with Galleon hedge fund CEO Raj Rajaratnam, pleaded guilty Thursday to one count of securities fraud and one count of conspiracy to commit securities fraud as part of a deal with government prosecutors.

The seventh person in the case to plead guilty, Kumar last week waived his right to be indicted by a federal grand jury, a move that suggests he may testify against Rajaratnam, who claims to be innocent of charges of securities fraud and conspiracy despite wire tap evidence to the contrary.

Kumar was one of the first six people arrested in the government's dragnet in October. The others included former IBM senior VP Robert Moffat and Intel executive Rajiv Goel.

The government pushed back the indictment of Moffat, Goel and Kumar to later this month evidently hoping to turn them into canaries. Moffat's lawyer denied last month that he was cooperating with authorities.

Federal prosecutors said Tuesday that they would bring new charges against Rajaratnam upping the amount of money he allegedly made trading on insider information to around $36 million, more than double their initial calculations.

They figure he made at least $19 million on AMD's 2006 acquisition of ATI Technologies. They got the information from an unidentified source "to whom Rajaratnam began making large payments in exchange for inside information in or about 2004."

Kumar admitted Thursday that Rajaratnam paid him for insider information. He was also invested in the Galleon hedge fund.

AMD hired McKinsey to appraise the spin-off of it fabs to the government of Abu Dhabi. Rajaratnam is also supposed to have gotten details about that deal from then-AMD CEO Hector Ruiz.

The authorities want Rajaratnam, who's now facing 15 years in prison if convicted, thrown in jail pending trial claiming he's a flight risk. He's out on $100 million bail and is trying to get it reduced.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at)sys-con.com or paperboy(at)g2news.com, and by phone at 516 759-7025. Twitter: @MaureenOGara

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