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lkraav's post on forums.virtualbox.org helped me to figure it out.

1. Create a new VM
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2. Uncheck the "Boot Hard Disk" option
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3. Connect the USB disk to your iMac, and choose "ignore" if your system says "The disk you inserted was not readable by this computer".(Because iMac does not understand ext3/4 file systems.)
4. Figure out the device name using "Disk Utility"(Under Application -> Utilities). Mine was /dev/disk1
5. Create vmdk file.

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   ~/VirtualBox VMs$ VBoxManage internalcommands createrawvmdk -filename MyUsbUbuntu/WD80.vmdk -rawdisk /dev/disk1 RAW host disk access VMDK file MyUsbUbuntu/WD80.vmdk created successfully.

6. Add an IDE Disk
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7. Choose the vmdk file just created.
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8. Boot your