[ by Melanie Gretchen ]

Raj Rajaratnam and Allen Stanford have something in common.  Not their crime (the hedge fund manager was convicted of insider-trading, while the Ponzi schemer was found guilty of fraud), nor their prison sentence (Mr. Rajaratnam is serving an 11-year sentence, while Stanford was sentenced to 110 years of prison).  Rather, both of their downfalls came in part at the hands of a trusted friend.

Stanford attended college with James Davis before he was appointed CFO of the Stanford Financial Group.  Similarly, Rajiv Goel was Mr. Rajaratnam's former Wharton classmate and friend who testified against the fund manager at his insider-trading trial.  Davis pled guilty in 2009 and served as the prosecution's chief witness, as part of a plea agreement, to avoid jail time.  Will Mr. Goel be so lucky?

What Mr. Goel Has Had to Offer. Since his arrest with Mr. Rajaratnam in 2009, Mr. Goel pled guilty in February 2010 to conspiracy and securities fraud.  During 4 days of testimony, in the prosecution of Mr. Rajaratnam, the Galleon Group LLC co-founder, he provided the government, with information regarding:

• their 25-year friendship, which began when they attended the Wharton School of the University of Pennsylvania
• conspiring with Mr. Rajaratnam from 2007 to 2009 and passed him illegal tips about Intel
• secret Swiss bank accounts that prosecutors used at trial – impossible to obtain without Goel because of secrecy laws in Switzerland, according to prosecutors

Even Assistant U.S. Attorney Reed Brodsky who prosecuted Mr. Rajaratnam championed Mr. Goel's contribution, in a memo this month to Judge Jones:

"Goel substantially helped the government secure a conviction in one of the most significant and high-profile insider-trading cases in U.S. history."

What Goel is Looking At: Precedent. One of Mr. Rajaratnam's closest friends faces up to 25 years in prison, though 2 other government witnesses who testified against Rajaratnam were spared prison terms by federal judges in Manhattan.

• Anil Kumar, the former McKinsey & Co. partner who was another Rajaratnam classmate and friend from Wharton, also faced a possible 25-year prison term.  U.S. Circuit Judge Denny Chin sentenced Kumar in July to 2 years’ probation, due to his "extraordinary" cooperation.

• Adam Smith, a former Galleon portfolio manager who worked for Rajaratnam and testified at his trial, also received a term of two years’ probation.

"Goel was not even close to Rajaratnam’s criminal league." -- David Zornow, Mr. Goel's attorney, said in his memo to the court, pointing out that his client "had lived a life free of crime until he started providing Rajaratnam with inside information."

To date, Mr. Goel has agreed to pay the SEC more than $254,000 to settle a civil lawsuit in which Galleon and Mr. Rajaratnam were among the defendants.  In addition, he has been unable to find work since he lost his job at Intel after his 2009 arrest, his lawyer said.

The case: U.S. v. Goel, 1:10-cr-00090, U.S. District Court, Southern District of New York (Manhattan).

For further details, go to [Bloomberg, 9/24/12] and our Who's News story, ["Ponzi Trial Face-Off: Stanford v. Old College Friend"].