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Is the Raj Rajaratnam insider trading scandal shaking up Cisco's executive ranks?
Wed, 3/16/11 - 11:03pm    View comments

Raj RajaratnamCiscoAccording to the website of the National Association of Corporate Directors (NACD), Cisco is one of the largest corporate clients of Orrick Herrington & Sutcliffe, a global law firm that appears on the list of possible witnesses (and/or companies that may be mentioned) in the court trial of the Raj Rajaratnam insider trading scandal.

However most menacing for Cisco's executive ranks, yesterday the Courthouse News Service revealed in a report that during the March 15, 2011 trial testimony of cooperating prosecution witness, Anil Kumar (a former top executive at McKinsey & Company who pioneered knowledge process outsourcing and business process outsourcing for McKinsey clients) testified:

Kumar said that Rajaratnam arranged for a boat in Miami as the two prepared for a mutual friend's wedding in Trinidad. While they were in Miami, Rajaratnam learned that he had been secretly taped by a friend, Kumar said. That friend turned out to be Ali Far, a hedge fund manager who pleaded guilty to the fraud, Kumar said. Kumar said that he was lying on a deck chair when Rajaratnam complained, "I can't believe he's betraying me!"

That night, Rajaratnam told him to call from pre-paid phones and mentioned that a Cisco executive said the networking company would acquire Starent, Kumar said. A week later, the acquisition was announced, and Rajaratnam and Kumar were both arrested, Kumar said.

Read more about the phone call from the Cisco executive who illegally tipped off Rajaratnam that Cisco was about to buy Starent.

NOTE:  On January 7, 2010 it was announced by the FBI that former McKinsey & Company executive Anil Kumar (Kumar advised McKinsey clients in the technology industry concerning their business strategies, including potential mergers and acquisitions), pled guilty to conspiring to commit insider trading crimes with Raj Rajaratnam (Rajaratnam paid Kumar amounts ranging up to $1 million in certain years which allowed Rajaratnam to make at least $19.7 million in illegal profits by trading with inside information that was illegally supplied by Kumar).

Furthermore, listen to the FBI wiretap tape of the phone call between Raj Rajaratnam and former McKinsey & Company CEO and Goldman Sachs Board Director - Rajat Gupta, discussing at the 4:50 time mark the attitude and behavior of Anil Kumar and what an ingrate Kumar must be for not being thankful for receiving $1 million a year from Rajaratnam for Kumar's supply of illegal insider trading information (keep in mind that Kumar at the time was a subordinate of Gupta at McKinsey).

Galleon Group insider trading key players

Wow is all I can say!


Because this week we've learned from sworn courtroom testimony that a Cisco executive illegally tipped off Raj Rajaratnam that Cisco was about to buy Starent Networks.

In my opinion, where there's smoke, there's fire!

Leading me to believe that the Raj Rajaratnam insider trading scandal might be shaking up Cisco's executive ranks.

First, it appears to me that Cisco CEO John Chambers is on his way out. And why do I think that? Well, Chambers appears to have only 5 direct reports now (Gary Moore, Frank Calderoni, Robert Lloyd, Ned Hooper and Wim Elfrink), also, with a dividend being paid, it would make a nice "swan song" during Chambers exit!

Ned Hooper's career at Cisco definitely appears to be in jeopardy, at least in my opinion. Especially, if Cisco begins divesting its underperforming business units which could begin as soon as May 2011.

Also, has Cisco jumped from the frying pan into the fire with its appointment of Blair Christie as Cisco's new Chief Marketing Officer?

Why do I ask?

Well, Blair Christie replaced Sue Bostrom (whose marketing leadership in my opinion set Cisco adrift), however, Christie's background is in investor relations, all fluff and no substance in my opinion. Cisco needs a hard-hitting, focused marketing pro who has achieved a solid record of outstanding results in the marketing trenches, and can keep Cisco's marketing message both very impactful and totally focused.

Finally, it will be shocking to learn the indentity of the Cisco executive who illegally tipped off Raj Rajaratnam with the inside information that Cisco was about to buy Starent Networks.

Related gossip:

Michael Powell will be resigning his seat on Cisco's Board of Directors effective April 1, 2011

What's your take, care to name names?

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