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* Whitman did not cut contact with suspect researcher - U.S.
* Third day on stand for insider trading defendant Whitman
By Grant McCool
NEW YORK, Aug 15 (Reuters) - Doug Whitman, a California hedge fund manager on trial for insider trading, had some explaining to do on the witness stand about his long-running contact with a stocks researcher he acknowledged had improperly obtained company secrets.
In Manhattan federal court on Wednesday, some of U.S. prosecutor Christopher LaVigne's cross-examination of Whitman was along the lines of: "You kept speaking to her?" "You didn't hang up did you?" and "You didn't say 'I don't want to talk about this' did you?"
Whitman, 54, acknowledged in "Yes" or "No" responses that, over several years, he sustained the relationship with former technology company researcher-turned-FBI-informant Roomy Khan, a central figure in the U.S. government's crackdown on Wall Street insider trading. Whitman denied doing it to obtain material non-public information and to obtain some benefit, which the prosecution has the burden to prove to convict him.
Khan and two other people who pleaded guilty to criminal charges agreed to record telephone conversations to help the FBI investigation and then testified against Whitman at his trial. Khan was also key to the case of onetime billionaire and Galleon Group hedge fund founder Raj Rajaratnam, who was convicted the same courthouse in May 2011 and is serving an 11-year prison term.
Whitman is the first among several insider trading trial defendants to gamble on taking the witness stand in the hope of winning an acquittal. His mother, brother and two sisters have often attended the proceedings.
So far, all of the dozens of money managers, traders, consultants and lawyers charged since 2009 in the sweeping probe have pleaded guilty or were convicted at trial by juries.
The founder of Whitman Capital of Menlo Park, California, is charged with conspiracy and securities fraud in illegally using inside sources to get advance information on the financial performance of Google Inc, Polycom Inc and Marvell Technology Group Ltd between 2006 and 2009.
Whitman Capital has about $100 million in assets under management, according to Whitman.
Jurors heard evidence during the three week-long trial that Khan told Whitman about her source on Google - an employee of an outside investment research firm that worked with the search engine company. He warned Khan not to pay the source the cash she demanded because Khan could end up in jail, according to trial testimony.
Prosecutor LaVigne pointedly said to Whitman on the stand that, even knowing that about Google, "you didn't cut off contact, did you?" Whitman replied: "No, sir."
LaVigne asked whether it was proper to get information on company earnings before a public announcement.
"If you get the actual number that would be improper," Whitman said.
He testified that obtaining "guidance" or what a company executive's "thinking" might be on performance was "color" that "I don't believe is material non-public information, typically."
Whitman is charged with securities fraud and conspiracy, which carry a combined possible maximum prison sentence of 25 years. Prosecutors said Whitman made about $900,000 in illegal profits by trading in the three stocks at issue in the case.
The companies are not accused of any wrongdoing.
Over the course of the trial before U.S. District Judge Jed Rakoff, the jury has heard tapped telephone conversations of Whitman asking Khan to contact a common source they had at video conference technology company Polycom. Prosecutors also played telephone taps between Whitman and the other two informants, former consultant Karl Motey and former Whitman employee Wesley Wang, discussing "moles" at companies.
"In all of these conversations, you're not asking them to get you material non-public information?" LaVigne asked.
"That's correct," Whitman replied.
The case is USA v Doug Whitman in U.S. District Court for the Southern District of New York, No. 12-125.