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Raj Rajaratnam Got Information From Moody's, Not Tipster, Says Lawyer

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The ratings agency is good for something!

Raj Rajaratnam’s lawyers sought to use cross-examination of a government witness to show Galleon Group LLC had legitimate reasons to buy Hilton Hotels Corp. stock before its 2007 buyout that didn’t involve inside information. During defense questioning of Margaret Holloway, a senior credit analyst at Moody’s Investors Service Inc., defense attorney Michael Starr tried to show sophisticated traders knew Hilton was a takeover target months before Rajaratnam was allegedly tipped. Prosecutors claim Galleon, co-founded by Rajaratnam, bought the shares because Deep Shah, a junior analyst at Moody’s, leaked news July 2, 2007, a day before the Blackstone Group LP’s takeover of the chain was made public.

Starr questioned Holloway about analyst reports and media accounts speculating on the likelihood of a buyout beginning four months earlier. He showed her documents filed with regulators stating that New York-based Galleon increased its holdings from 250,000 shares in the quarter ended March 31, 2007, to 475,000 three months later -- prior to the alleged tip. “This is not a secret document, is it?” Starr asked Holloway about an April 30, 2007, report by Morgan Stanley saying that private equity investors were “swarming the lodging space.” Holloway replied that it wasn’t.

Hilton Stock Purchase Was Lawful, Says Jurors [Bloomberg]