Galleon scandal twists and turns
A reported subpoena shows that the alleged insider-trading ring is making its present felt further down Wall Street.
NEW YORK (Fortune) -- A recent report that Galleon investigators have subpoenaed a former SAC Capital Advisors employee shows that the scandal's tentacles are maybe reaching farther and farther.
Employees at two hedge funds are at the heart of the complaint: Raj Rajaratnam, the head of the Galleon Group, and Danielle Chiesi and Mark Kurland, of New Castle Funds. The original complaints filed by the U.S. government also accuse executives at IBM (IBM, Fortune 500), Intel (INTC, Fortune 500), and McKinsey & Co. of insider trading. All defendants have denied the charges.
And now Richard Grodin, formerly of SAC, one of the country's most well-respected and largest hedge funds, may have a connection. Federal investigators in the Galleon case have sent him a subpoena, according to a Wall Street Journal report. Subpoenas do not suggest wrongdoing, but they do seek information.
A spokeswoman for the U.S. Attorney's office in Manhattan declined to comment on whether Grodin had been subpoenaed. According to the Journal, the government is interested in his trading records, but the paper did not specify over what period of time.
Grodin had been a portfolio manager at SAC. He left the firm in 2004. The Securities and Exchange Commission's complaint against the six people accused of insider trading focuses on events that took place between 2005 and 2009.
After leaving SAC, Grodin started a fund called Stratix in 2004 with fellow SAC alumnus Ian Goodman. The fund focused on media and telecom investments. The pair liquidated the fund in 2007 and parted ways. In 2008, Grodin started another fund called Quadrum, which focused on technology and energy.
Grodin also worked with Choo-Beng Lee, who is a cooperating government witness in the Galleon case, according to reports. Lee was Grodin's analyst at SAC in the 1990s, and later followed him to Stratix.
Prior to working with Grodin, Lee also worked at Advanced Micro Devices, a microprocessor supplier that's cited in the government complaint against Danielle Chiesi, the Newcastle Partners portfolio manager who's allegedly part of the Galleon ring. According to the complaint, an AMD executive -- reportedly former chief executive Hector Ruiz -- gave Chiesi inside information about a major spinoff of AMD (AMD, Fortune 500). Ruiz has not been charged.
Perhaps more interesting than Grodin's ties to a huge and well-respected hedge fund is his hasty departure from the hedge fund world.
In the week before news of the subpoena broke, Grodin wrote a letter to Quadrum investors saying he was burned out and that he was closing shop, according to people familiar with the matter.
"The money has been returned to investors, but as for explanations, there are none," one source tells Fortune.
At this point, Grodin's role in the Galleon case, if any, is unclear and he has not been charged. Fortune's own calls to Grodin and former Quadrum portfolio managers were not returned, and the phones at Quadrum have been disconnected. 
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