Weeks Before Insider-Trading Trial, Rajaratnam Invested in Witness’s Hedge Fund

Richard Schutte, former president and chief of research at Galleon Group LLC, arrives at federal court in New York, U.S., on Tuesday, April 12, 2011. Schutte testified that Raj Rajaratnam, who co-founded the Galleon Group, reviewed dozens of analyst reports each week and was "amazingly educated" about stocks, research and investment strategies. Photographer: Louis Lanzano/Bloomberg via Getty Images Photo: Bloomberg/2011 Bloomberg

For days, Richard Schutte, former president and chief of research at the Galleon Group, has been testifying that his old boss, Raj Rajaratnam, used public earnings reports and other legit intel — not insider information — to inform his trades. It wasn't until the end of the federal prosecutor's cross-examination, however, that jurors learned that Schutte may have had some financial incentive to offer testimony like:

"“It's surprising to me how educated [Rajaratnam] is on the topics of any meeting we are in, he knows the issues, he knows what questions to ask, very professional, very respected in my opinion."

Incentive like the fact that eight weeks before the trial, Rajaratnam's family invested $15 million in SpotTail Capital Advisers, the hedge fund Schutte started after Rajaratnam's arrest. That $15 million makes Rajaratnam by far the largest investor in SpotTail's $35 million fund. Like we said, the man knows how to motivate.

Galleon Chief Put Millions Into Fund of Ex-Employee [DealBook/NYT]