A second Goldman Sachs Group Inc (GS) employee is under investigation for passing illegal tips to Galleon Group LLC co-founder Raj Rajaratnam, a lawyer for former Goldman Sachs director Rajat Gupta said in court on Friday.
Gupta, the one-time McKinsey & Co leader who has pleaded not guilty, faces trial May 21 for allegedly leaking tips to Rajaratnam about Goldman Sachs and Procter & Gamble Co (PG), where Gupta was also a director. He faces six counts of securities fraud and one count of conspiracy.
Prosecutors revealed in February in addition to Gupta, a person they described as an “insider” and a “Goldman Sachs executive” provided information about Apple Inc and Intel Corp to Rajaratnam. Gupta’s lawyer, Gary Naftalis, said at a court hearing that Assistant US Attorney Reed Brodsky notified him on April 18 that a second Goldman Sachs employee also provided information to Rajaratnam about two stocks.
Naftalis said the second Goldman Sachs employee identified by Brodsky “is not the first one that we have disclosure about”. He said the second tipper was “another current Goldman Sachs person who is alleged to have given non-public information”.
And according to Brodsky’s request, I am not going to name him or regarding the two public companies that he allegedly gave material, non-public information to Raj Rajaratnam about.”
“His or her name,” Brodsky interjected.
“We obviously would request of the government to get us any and all information relating to this additional source that Raj Rajaratnam had at Goldman Sachs of non-public information as soon as possible,” Naftalis said.
Brodsky didn’t dispute the defense lawyer’s account of the second Goldman Sachs tipper and in court, handed a copy of his letter to US district judge Jed Rakoff, who is presiding over the case.
Michael DuVally, a spokesman for New York-based Goldman Sachs, declined to comment on the statements in court. Bruce Riordan, a spokesman for US attorney Andre Birotte Jr in Los Angeles, also declined to comment.
Naftalis previously asked the government to disclose any evidence that Rajaratnam had additional inside sources at Goldman Sachs. At a March 16 hearing, Naftalis asserted that the “wrong man” was on trial.
The evidence may be used to show that the other source who provided information to Rajaratnam was the real culprit, not Gupta, Naftalis has said.
Rakoff pressed prosecutors to provide the defense with the identity of “Mr X,” the other Goldman Sachs employee who was a purported source for Rajaratnam. That person’s identity hasn’t been made public.
Prosecutors disclosed in a February 3 letter to Rakoff that “certain witness statements related to an insider at Goldman Sachs” who provided tips that “did not relate to Goldman and or Procter & Gamble,” the judge said at the hearing as he read.
Rakoff said that in his letter, Brodsky asked Birotte’s office in Los Angeles to provide the defense with documents and other information.
“I, of course, am disappointed to learn there’s a case involving insider trading of any kind whatsoever under the sun that is not centered in the southern district of New York, but so be it,” Rakoff said as he concluded yesterday’s hearing.
The U.S. investigation of possible insider trading by Goldman Sachs employees expanded in March to include David Loeb, a managing director who works on Asia equity sales in New York and focuses on Taiwan, said a person who declined to be identified because the matter wasn’t public.
In February, Henry King, an analyst covering Taiwan, was identified as being under investigation by U.S. authorities, a person familiar with the matter said.
After court yesterday, Naftalis declined to comment on whether Loeb or King were either “Mr. X” or the second Goldman Sachs tipper employee referred to at the hearing. Brodsky also declined to comment.
Goldman Sachs said in a Feb. 28 regulatory filing that it was “fully cooperating” with any investigations of insider trading.
The case is U.S. v. Gupta, 11-cr-00907, U.S. District Court, Southern District of New York (Manhattan).
