Former Goldman Sachs Group director Rajat Gupta rested his defence to federal insider-trading charges without testifying or being allowed to play wiretapped recordings that his lawyer called “substantial” to his case.
Defence attorney Gary Naftalis told Judge Jed Rakoff on Tuesday that Gupta, 63, who ran McKinsey & Co from 1994 to 2003, had finished offering evidence. The trial began May 21. “Defence rests, your honor,” Naftalis said. Summations are set to begin tomorrow morning, and Rakoff said the jury may begin its deliberations late tomorrow afternoon.
Gupta is accused of leaking inside information to Galleon Group hedge fund co-founder Raj Rajaratnam about Goldman Sachs and Procter & Gamble, where Gupta was also a director. Rajaratnam was convicted at a trial last year and is serving an 11-year prison sentence.
Gupta’s defence, which began June 8, was based in part on a claim that another Goldman Sachs executive, David Loeb, passed the tips that prosecutors say came from Gupta. Rakoff barred the defence from playing wiretapped recordings from August 2008 that the defence claims show Loeb tipping Rajaratnam.
Another Gupta attorney, David Frankel, called the recordings a “substantial” part of the defence. Michael DuVally, a spokesman for New York-based Goldman Sachs, declined to comment on the decision about the wiretaps.
Loeb hasn’t been accused of wrongdoing. Prosecutors have alleged in court that Loeb told Rajaratnam about Intel Corp, Apple Inc and Hewlett-Packard Co, none of which are involved in Gupta’s case. Rakoff yesterday called the recordings inadmissible “hearsay” and reiterated that ruling on Tuesday.
Yesterday the defence had Richard Schutte, the former president of Galleon’s domestic unit, testify about the relationship between Galleon and Goldman Sachs and that Galleon had lawful sources of information for its trades.
The defence said Gupta had no motive to tip Rajaratnam, pointing to his loss of a $10 million investment in a Galleon fund.
The tips Gupta allegedly passed include Goldman Sachs earnings in the first quarter of 2007 and fourth quarter of 2008. Another involves a $5-billion Berkshire Hathaway Inc investment in Goldman Sachs on September 23, 2008. Prosecutors have said Gupta told Rajaratnam that Cincinnati-based P&G planned to sell its Folgers Coffee unit to JM Smucker Co.
Rajaratnam was convicted at a trial last year and is serving an 11-year prison sentence. He and Gupta are the biggest figures caught in a nationwide insider-trading probe that began in October 2009 and has resulted in more than five dozen arrests.
Gupta decided over the weekend not to testify after his lawyers said on June 8 that it was “highly likely” he would take the stand.
Yesterday the defence had Richard Schutte, the former president of Galleon’s domestic unit, testify about the relationship between Galleon and Goldman Sachs and that Galleon had lawful sources of information for its trades.
The defence said Gupta had no motive to tip Rajaratnam, pointing to his loss of a $10 million investment in a Galleon fund and Gupta’s subsequent claim that Rajaratnam cheated him. They also point to records showing Gupta in a meeting about malaria-prevention with a United Nations official around the time he allegedly tipped Rajaratnam to the Buffett deal.
Character witnesses including Gupta’s childhood friend testified that Gupta was honest and forthright. The defendant’s daughter, Geetanjali Gupta, was also permitted to testify.
The defence had pressed Rakoff to admit e-mails from Loeb and wiretap recordings of Rajaratnam’s mobile phones from August 7 to August 22, 2008.
According to Frankel, Loeb can be heard on the recordings, made by the Federal Bureau of Investigation, telling Rajaratnam that he usually gives information to Adam Smith, then a Galleon trader. Smith has pleaded guilty and is aiding prosecutors.
“Loeb says, ‘Since I’ve normally given this to Adam to give to you, this goes to you and Adam,’” Frankel quoted from a transcript of a conversation between Loeb and Rajaratnam. “I give it to a couple of guys on the street, I call you and Adam first.”
The defence has argued that Gupta parted ways with Rajaratnam after he discovered the fund manager had withdrawn money without his knowledge from the Voyager Fund, an investment they had created together.
Defence lawyers concluded their case by playing an Oct. 2, 2008, wiretapped call between Rajaratnam and a Galleon portfolio manager, Sanjay Santhanam, in which the two men can be heard discussing the Voyager Fund. During the call, Rajaratnam can be heard saying “I’m a big boy” and that he isn’t sure Gupta is, adding “I didn’t tell him I took the liquidity out.”
