An ex-Galleon portfolio manager testified in the trial of former Proctor and Gamble (P&G) board director Rajat Gupta that he had traded in the consumer giant's stocks in 2009 after learning that Raj Rajaratnam had a "guy" on the company's board.
Michael Cardillo, who has pleaded guilty to insider trading charges and is cooperating with the government, told jurors on the fifth day of Gupta's insider trading trial that he and two other portfolio managers sold short P&G stock on January 29, 2009 after betting that it's price would fall.
He said he was directed to sell the stock by Rajaratnam's brother, R K Rajaratnam who was also a fund manager in his brother's multi-billion dollar hedge fund.
Cardillo was told that P&G's earnings known as "organic growth" were not as high as previously expected.
"I was told by R K that Procter & Gamble was expecting to come in 4 to 6% but was actually going to come in lower at 2 to 4%," Cardillo said in Manhattan federal court yesterday.
When asked by US District Court Judge Jed Rakoff what Rajaratnam's brother had told him, Cardillo said, "He told me he was hearing from Raj's guy on the P&G board".
Gupta, a former McKinsey head and director on Goldman and P&G boards, has been charged with passing confidential information he received in his capacity as board member of the two companies to convicted Galleon founder Rajaratnam, who is currently serving an 11-year prison term.
Gupta has pleaded not guilty to the charges.
The first week of the trial, which began on May 21, concluded yesterday with the government playing a July 2008 recorded phone conversation between Gupta and Rajaratnam and presenting before the 12-member jury emails, phone records and wiretaps to show the close relationship between the two.
In the July conversation, Gupta is also heard discussing business plans with Rajaratnam.
In its bid to demonstrate the ties between Gupta and Rajaratnam, the government presented details of a September 2007 email by Gupta to Goldman Sachs director and professor at Harvard Business School Bill George, who appeared as the government witness yesterday.
Gupta and Rajaratnam had helped start a private equity fund focused on investments in Asia called New Silk Route in 2007.
