Rajiv Goel says he tipped Rajaratnam
Testifying in the case in a court here on Tuesday Goel said, "Rajaratnam and I were very good friends."
He said that he began to pass on company information to Rajaratnam, Galleon Group founder, from 2005.
"He was a good man to me," he told the jury.
"I was a good pal?so I gave him the information."
Goel is the second key witness after Anil Kumar, a former McKinsey director, who has finished testifying on behalf of the government.
Both men have pleaded guilty.
The 53-year-old Sri Lankan-born billionaire allegedly paid Goel six figure amounts for the information.
In 2005, Goel said, he received USD 100,000 to buy a house and then a year later 500,000 for a family matter.
The former Intel executive also said that he earned more than USD 700,000 after Rajaratnam took control of his brokerage account.
Goel, 52, and Rajaratnam met at the Wharton School of the University of Pennsylvania in the early 1980s.
Kumar also went to Wharton during the same time.
On Monday, the prosecution played a secretly recorded phone conversation on March 19, 2008 in which Goel told Rajaratnam, that Intel was planning to make a USD 1 billion investment in a new joint venture with Clearwire.
Rajaratnam allegedly purchased 125,800 shares of Clearwire on March 24, 2008, based on inside information.
Rajaratnam is accused of making more than USD 45m by illegally trading on insider information.
His lawyers say that Rajaratnam conducted his business based on information that was already in the public domain and through research.
Out of the 26 people arrested in this case, 19 have pleaded guilty.
Rajaratnam, however, denies any wrongdoing.
He was arrested in October 2009, and has been freed on bail of USD 100m.
If found guilty, he could face up to 20 years in prison.
It also emerged yesterday that Lloyd Blankfein, chairman of Goldman Sachs Group Inc, will also be called as a witness in the case to testify about Rajat Gupta, former Goldman Sachs board member, who is also accused of passing insider information to Rajaratnam.
Gupta denies wrongdoing and has sued US regulators in the same federal court as the Rajaratnam trial.
The government lawyers, however, don`t want Rajaratnam`s lawyer to ask Blankfein about his bank`s operations during the 2008 financial meltdown or for any matter that is being investigated by the Justice Department.
"This court should preclude the defendant from suggesting to the jury through questions or otherwise that Goldman Sachs or Mr Blankfein was responsible for the 2008 financial crisis," Preet Bharara, US attorney for New York?s Southern District, wrote in a letter to Judge Richard Holwell.
"Whether Goldman Sachs played any role in that crisis is wholly irrelevant to Mr Blankfeins testimony about Mr Gupta," it said.
In the letter, the government expressed concern that the defence may rake up the issue of existing legal proceedings against Goldman Sachs to argue that Blankfein isn`t a credible witness.
"But this claim is totally unfounded and would threaten confusion of the issues," the letter said.