Roomy Khan Cites Arrest Of Paris Hilton As The Reason For Buying Hilton Hotels Corp. Shares

Bloomberg reports that Roomy Khan, who is the government witness in the insider trading case against Galleon Group founder Raj Rajaratnam, told investigators that she had purchased shares in Hilton Hotels Corp. before the company was acquired by a private equity firm as she thought the arrest of socialite Paris Hilton, who is Hilton hotels founder Conrad Hilton’s great-granddaughter, would garner publicity for the company.

John Dowd, Rajaratnam’s lawyer, has questioned Khan’s credibility, saying she continues to tell outright lies about the reasons for her stock purchase. Dowd, on Friday filed papers in a court asking a judge to order prosecutors in the insider trading case to turn over documents about Khan’s credibility. Dowd plans to use this as part of a strategy to contain wiretap recordings of Rajaratnam, which were done entirely on basis of Khan’s testimony.

Dowd has cited information from FBI interview reports to question Khan’s credibility. He writes, citing a FBI summary, “in an interview on December 17, 2007, Khan preposterously claimed that she purchased Hilton stock shortly before the company was acquired by a private equity firm ‘because at the time, Paris Hilton was incarcerated so Khan thought this could be good publicity for the hotel.” Dowd also disclosed on Friday that Khan had been arrested for theft of trade secrets back in May 2000.

Khan’s lawyer, Stanislao German, responded in an email message that the only comment he can make on the whole issues is that Dowd and Rajaratnam’s other lawyers, “never seem to address the wiretaps, which should be the question you should be asking him.”