Gupta insider trading trial nears end

A former director of Goldman Sachs and Procter Gamble is accused of leaking boardroom secrets about the two companies to a former hedge fund manager convicted last year of insider trading

THE FEDERAL judge overseeing the insider trading trial of Rajat K Gupta made it clear from the outset that he would limit evidence related to the defendant’s extensive charitable works and humanitarian acts. “If Mother Teresa were here and charged with bank robbery, the jury would still have to determine whether or not she committed bank robbery,” said Judge Jed S Rakoff, the presiding judge, during a pretrial hearing last month.

Rakoff has followed through on his promise to curb such testimony. On Monday, the defence was restricted in what it could elicit from three character witnesses for Gupta, who ran the consulting firm McKinsey Co and played a leadership role in various global health initiatives.

The government has accused Gupta, a former director of Goldman Sachs and Procter Gamble, with leaking boardroom secrets about those two companies to Raj Rajaratnam, a former hedge fund manager convicted last year of insider trading. The jury trial is now in its fourth and final week in Federal District Court in Manhattan. If found guilty, Gupta, a 63-year-old resident of Westport, Connecticut, faces up to 20 years in prison.

Among the witnesses who took the stand on Monday was Suprotik Vasu, an executive at the United Nations working on a project to eradicate malaria. After being asked how he met Gupta, Vasu (34) began to recall in detail their first encounter, in January 2008.

“I got an urgent call that a businessman wanted to end all childhood deaths from malaria by 2025,” Vasu said. A prosecutor jumped out of his chair and objected to the testimony. Rakoff sustained the objection.

Two other witnesses took the stand, one who had travelled from India, to testify about Gupta’s character: Ashok Alexander, the director of the Bill Melinda Gates Foundation in India and a former McKinsey colleague, and Anil Sood, a childhood friend and a former executive at the World Bank. Their brief testimonies were an effort to show the jury that Gupta was a person of high integrity.

On cross-examination, Reed Brodsky, the prosecutor, asked them if they had knowledge of any investments or business dealings that Gupta had had with Rajaratnam, who ran the now-defunct Galleon Group hedge fund. They said that they had not.

Gary P Naftalis, a lawyer for Gupta, used Vasu to walk the jury through Gupta’s busy calendar on September 23rd, 2008 – a day, prosecutors say, that Gupta tipped off Rajaratnam to Berkshire Hathaway’s $5 billion investment in Goldman during the depths of the financial crisis.

The calendar showed that Gupta listened to the Goldman board call for about a half-hour beginning at 3.15pm. On that call, he and his fellow directors approved the Berkshire investment.

Prosecutors say that Gupta immediately phoned Rajaratnam after the call and told him the news, enabling Rajaratnam to buy Goldman stock before its public announcement later that evening.

Naftalis highlighted meetings that Vasu had with Gupta after the Goldman call, including a conference with Julian Schweitzer, the World Bank’s head of health nutrition, and Raymond G Chambers, the United Nations special envoy for malaria.

Vasu then accompanied Gupta to a dinner honouring the health minister of Ethiopia at Django, the now-closed Midtown Manhattan brasserie.

Had Gupta brought up either Goldman Sachs or Warren E Buffett, the head of Berkshire, at those meetings, Naftalis asked. Vasu said that he hadn’t. Vasu’s testimony opened the door for the government to revisit phone records showing at least six telephone calls between Gupta and Rajaratnam on September 23rd, including a 56-second conversation that occurred just moments after the Goldman board call.

Brodsky asked Vasu if he was present for that call. Vasu said that he wasn’t. Toward the end of Monday’s session, Gupta’s oldest daughter, Geetanjali Gupta, took the stand. Nearly every day of the trial, she and her three sisters have flanked Gupta’s wife in the front row of the spectators’ gallery. Geetanjali Gupta (33) told the jury that she had degrees from Harvard College, Harvard Business School and Harvard Law School.

She said that she was the mother of two-and-a-half year-old twins and worked for the Harvard Management Company, a firm that oversees the investment of the university’s endowment.

Naftalis began to ask Geetanjali Gupta about a conversation that she had with her father relating to a fallout he had with Rajaratnam in 2008. The defence contends that Gupta had no incentive to tip off Rajaratnam during that period because he had lost his entire $10 million investment in a Galleon fund.

The prosecution objected to the line of questioning, leading to a private conference between the two sides that ended the day. Geetanjali Gupta was expected to resume her testimony yesterday, with the defence resting its case later in the day. Summations are scheduled for today.

(New York Times service)