Another Goldman Insider Tipped Rajaratnam, Gupta Lawyer Says

Apr 20 2012 | 2:23am ET

Galleon Group founder and convicted insider-trader Raj Rajaratnam had at least four sources within Goldman Sachs, the lawyer for former Goldman director Rajat Gupta revealed in court yesterday.

Gary Naftalis said that prosecutor Reed Brodsky told him of an insider-trading investigation into a current "Goldman Sachs executive" in California. That "Goldman Sachs person," as Naftalis called him, gave Rajaratnam information about two companies.

The notification from Brodsky came at 11:06 p.m. on Wednesday, Naftalis, who conceded that "Mr. Brodsky is a harder worker than I am," told U.S. District Judge Jed Rakoff. Brodsky did not dispute Naftalis' narrative.

Naftalis asked prosecutors "to get us any and all information relating to this additional source that Mr. Raj Rajaratnam had at Goldman Sachs of non-public information as soon as possible." The investigation of that person is being conducted by the U.S. Attorney's Office for the Central District of California in Los Angeles. Brodsky has asked that office to provide Naftalis with more information.

Gupta, the former head of McKinsey & Co., faces trial next month on charges that he passed confidential information about Goldman and Procter & Gamble, where he was also a director, to Rajaratnam, a long-time friend and business partner. Naftalis' defense is expected to focus on Rajaratnam's other sources, at least one of whom is the real source of the information Gupta is being tried for passing.

In addition to Gupta and the most recent, unidentified Goldman executive, top salesman David Loeb and Taiwan research chief Henry King are alleged Rajaratnam sources. The two men are under investigation, and Loeb is believed to be the source identified as "Mr. X," who prosecutors have said did not give Rajaratnam information about either Goldman or Procter. Both King and Loeb attended meetings with Galleon.

In addition yesterday, Rakoff allowed a sixth securities fraud charge against Gupta, despite his warning in February that new allegations would not be allowed. The judge said yesterday that prosecutors had until Monday to add evidence prior to the May 16 trial date.


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