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Gupta Trial: Two Sides of Rajat Gupta

May 22, 2012
[ by Melanie Gretchen ] Rajat Gupta has been described in many ways.  The former director of Goldman Sachs and Procter & Gamble faces accusations that he leaked boardroom secrets about those two companies to his friend and business associate Raj Rajaratnam, the convicted former money manager who ran the Galleon Group, once one of the world’s largest hedge funds. Prosecution. To date, the government has depicted Mr. Gupta, a resident of Westport, Conn., as the ultimate insider who, after running the elite consulting firm McKinsey & Company, joined the boards of Goldman and P&G, where he was privy to these companies’ most closely guarded secrets.  On Monday, for the mostly working-class jury, Reed Brodsky presented the unfair advantage that he said Rajaratnam had received from Mr. Gupta’s reported tips. "Getting tips from Gupta was like knowing the outcome of a game before it ends or getting tomorrow’s business news today." In one instance, Mr. Gupta participated in an emergency Goldman board meeting via phone during the financial crisis, in which he and his fellow directors approved a $5 billion investment from Warren E. Buffett’s Berkshire Hathaway.  Immediately after the meeting ended, Mr. Gupta called Rajaratnam, who bought $43 million of Goldman shares in the company just before the market closed, earning the hedge fund manager $1 million, Mr. Brodksy said. "Together they offered each other far more than they could achieve individually." Defense. On behalf of Mr. Gupta, lead lawyer Gary Naftalis accused the government of giving the jury a "cropped photograph" instead of the entire picture.  He said the government lacks sufficient evidence to convict Mr. Gupta: it had no wiretapped recordings of Mr. Gupta providing secret information to Rajaratnam, and on the few tapes in which Rajaratnam suggests to colleagues that he received tips about Goldman, Mr. Gupta "isn’t even mentioned by name," Mr. Naftalis said. Going forward, Mr. Naftalis may pursue another defense strategy.  Galleon was a top customer of Goldman and hinted that Mr. Gupta was not the only Goldman insider with valuable information; rather 3 executives from the company are under investigation by the federal authorities for possibly leaking illicit information. Toward drawing attention away from his client, Mr. Naftalis highlighted a special visit that Gary D. Cohn, Goldman’s co-president, made to the offices of Galleon around the time of Mr. Gupta’s supposed leaks.  "The No. 2 guy at Goldman Sachs doesn’t make house calls for every Tom, Dick and Harry," Mr. Naftalis said. The Man in Question. For his own part, Mr. Gupta remained neutral throughout the lawyers' presentation of their case, save for banter between Mr. Naftalis and Judge Jed S. Rakoff, who are old friends. At one point, during a discussion outside the presence of the jury, Judge Rakoff warned Mr. Naftalis not to get into his client’s record of philanthropy, which includes efforts to combat global health concerns.  The lawyer argued that he needed to counter accusations that his actions had been motivated by greed, and he asked to be permitted to mention Mr. Gupta’s work fighting "AIDS, malaria and tuberculosis." "Or the bubonic plague," chided Judge Rakoff, causing the courtroom to burst into laughter, including the man on trial.  Judge Rakoff did not allow Mr. Naftalis to list the specific diseases. On the Horizon. Witness testimony is expected to begin on Tuesday, including Caryn Eisenberg, Rajaratnam’s former secretary, and Carolann Shields, an employee at McKinsey.  Also scheduled to testify this week are Byron D. Trott, a former Goldman banker who helped manage Mr. Buffett’s investment, and William George, a Goldman director and former chief executive of Medtronic. For further details, go to [Dealbook, 5/21/12].