Former McKinsey & Co. chief Rajat Gupta's lawyer previewed his planned defense on Friday during a testy court hearing.
Gary Naftalis insisted that the "wrong man is on trial" for passing confidential information to Galleon Group founder Raj Rajaratnam. According to Naftalis, Rajaratnam's source was not his longtime friend Gupta, who served on the bank's board of directors, but an employee of the firm.
Naftalis and prosecutor Reed Brodsky exchanged sharp words at the pre-trial hearing, with the former accusing the latter of saying "the government has a person who provided confidential information to Raj Rajaratnam about Apple and Intel. There is also wiretap evidence, substantial evidence of another source at Goldman Sachs."
According to prosecutors, Gupta passed confidential information about Goldman—including quarterly earnings and a major investment by Berkshire Hathaway—and another company whose board Gupta served on, Proctor & Gamble. At Rajaratnam's trial, which resulted in the hedge fund manager's conviction and an 11-year sentence, Goldman CEO Lloyd Blankfein testified that the information Gupta is heard passing to Rajaratnam on a wiretapped phone call was privileged.
Naftalis did not identify the alleged source, although federal prosecutors are reportedly investing two Goldman executives—top salesman David Loeb and Taiwan research chief Henry King—for insider-trading. Both men attended meetings with Galleon, and Loeb is the Goldman source identified as "Mr. X" at the insistence of Gupta's legal team.
Gupta's trial is set to begin on May 21.