Friday, 28 October 2016
Last updated 10 hours ago
May 22 2012 | 12:26pm ET
The two sides in the Rajat Gupta insider-trading trial laid the groundwork for their cases yesterday, with prosecutors accusing the former McKinsey & Co. chief of tipping Galleon Group founder Raj Rajaratnam during his entire tenure on the Goldman Sachs board, and Gupta's defense team heaping scorn on the prosecution's circumstantial case.
Gupta's trial, expected to last as long as four week, began yesterday. Assistant U.S. Attorney Reed Brodsky, who was part of the team that sent Rajaratnam to prison for 11 years last year, told jurors that Gupta began passing Rajaratnam tips about Goldman within months of joining the bank's board at the end of 2006. The tips included Gupta's advance notice of Berkshire Hathaway's 2008 plan to invest $5 billion in Goldman, a leak that allowed Galleon to earn almost $1 million in illicit profits, Brodsky said in his opening statement yesterday afternoon.
"Gupta's message to Rajaratnam on that phone call was clear: 'Buy Goldman Sachs stock. Buy Goldman Sachs stock," he said. Gupta is also accused of tipping Rajaratnam about another company on whose board he served, Procter & Gamble.
As for Gupta's motive in tipping his longtime friend, Brodsky pointed to a 2007 meeting at which Gupta's post-McKinsey plans were discussed, including a possible role with Galleon. The prosecutor said that Gupta profited from the scheme through his indirect investments in Galleon.
Not so, Gupta's lead lawyer, Gary Naftalis, said in his opening. Gupta never traded on any insider information—"I'm telling you in no uncertain terms, there were no insider trades," he told the jury.
What there is, Naftalis said, was an entirely circumstantial case built on wiretaps, most of which do not involve Gupta at all.
"The prosecution is essentially asking you to guess and speculate as to what happened in conversations of which they have no real direct evidence," Naftalis said. "We don't guess people into guilt in America…. We don't convict people of crimes based on rumors, speculation, conjecture."
Prior to the opening statements, U.S. District Judge Jed Rakoff lived up to his reputation as a quick and efficient seater of juries, empanelling 12 jurors and four alternates before lunch yesterday.
The panel that will decide Gupta's fate—he faces decades in prison if convicted—is made up of eight women and four men from throughout the Eastern District of New York, including a Bronx teacher, a Westchester County beauty consultant and a Manhattan day school's counseling director. Two nurses, a consulting firm head, a marketing manager, a non-profit executive and a physician's assistant also sit on the jury.
While the empanelling went quickly, it was not without its contentiousness. Prosecutors objected to the four-strong legal team's use of jury consultant Julie Blackman, who worked on the Martha Stewart and Frank Quattrone cases, and a team of staffers at Kramer Levin Naftalis & Frankel, who were using a real-time trial transcript feed to research potential jurors.
Rakoff brushed off the objection, saying it would help uncover potential conflicts.