In October 2009, Raj "Mr. October" Rajaratnam and Anil Kumar were together in Miami Beach lounging, living the high life - and swapping illegal stock tips.  The last piece of direct testimony provided by Mr. Kumar on Tuesday, reports NYT Dealbook's Peter Lattman.

The criminal trial is that of Mr. Rajaratnam, in Federal District Court in Manhattan.  Mr. Kumar, a former senior executive at McKinsey & Company, has pleaded guilty to providing Mr. Rajaratnam, the founder of Galleon Group hedge fund, with insider information about his clients in exchange for about $2 million.

In early October 2009, the pair took their wives to Trinidad to attend the wedding of a woman who had worked for the two men.  On their way back from the Caribbean, they stopped in Miami to spend 2 days at Mr. Rajaratnam’s apartment, according to Mr. Kumar - a luxury condominum in the Setai Hotel, described on its Web site as “an intimate, serene oceanfront resort in the heart of South Beach.” 

Mr. Kumar said Mr. Rajaratnam was generous during their minivacation.  “He arranged a trip out on a boat one night and we just sat on the beach,” he said.

While on the beach, Mr. Rajaratnam received a call and walked down the beach to have a private conversation for about 5 or 10 minutes. He came back excited, said Mr. Kumar, who explained that Mr. Rajaratnam said he had gotten a call from a Cisco Systems executive that Cisco is buying a company called Starent.

The conversation then turned a bit somber, according to Mr. Kumar. Mr. Rajaratnam said he was disappointed and felt betrayed because Ali Far, a former Galleon employee, was wearing a wire. You should be careful now and use only prepaid phones when calling me, Mr. Rajaratnam said, according to Mr. Kumar.

That night, in Mr. Rajaratnam’s condominium, Mr. Kumar signed on to his brokerage account at Charles Schwab and bought about $7,000 worth of Starent stock. “I thought, let me just buy a few shares of Starent to see if this thing ever happens,” Mr. Kumar said.

It did happen, on Oct. 13, when Cisco acquired Starent for $2.9 billion. 

Three days later, federal authorities charged them with insider trading.   [NYT Dealbook, 3/15]