Tuesday, 23 September 2014
Last updated 1 hour ago
May 24 2012 | 10:59am ET
On the third day of his trial for insider-trading, jurors heard Rajat Gupta's voice for the first time.
The former McKinsey & Co. chief, charged with passing confidential information to Galleon Group founder Raj Rajaratnam, did not take the stand. But prosecutors played a 23-minute phone call between Gupta and Rajaratnam that the government secretly recorded on July 29, 2008.
No insider tips were shared during the call. But Gupta does tell Rajaratnam that he wishes to continue their "dialogue" on "how I can be helpful in Galleon International. By the way, not Galleon International. Galleon Group."
Gupta did tell Rajaratnam, who asked about a rumor that Goldman Sachs, which Gupta served as a director, was on the prowl for a commercial bank to buy. Gupta told the now-imprisoned hedge fund manager that :this was a big discussion at the board meeting," although Goldman wound up not buying a bank.
According to prosecutors, the tape is evidence of the close, collaborative relationship between Gupta and Rajaratnam, who was convicted of insider-trading last year.
Prosecution witness Byron Trott, a former Goldman banker, did however further the government's allegation that Gupta tipped Rajaratnam about Berkshire Hathaway's 2008 investment in Goldman. Trott called the $5 billion deal "as top secret as you could get," and that it was bank policy "never to talk about confidential information in public, or elevators. It was ground for being fired."
Gupta is alleged to have called Rajaratnam seconds after the Goldman board conference call at which the Berkshire deal was discussed, just minutes before the markets closed. Rajaratnam and his traders quickly bought up almost 300,000 shares of the bank prior to the 4 p.m. close, moves which made the hedge fund almost $1 million when the deal was announced about two hours later.
According to Trott, Rajaratnam wouldn't have had much time to learn the information. The long-time friend of Berskhire chief Warren Buffett said that the deal was completed in 30 or 40 minutes on Sept. 23, 2008, after 2:30 p.m.
"Warren was not reachable until" then, Trott testified. "He told me he promised to take his grandkids to Dairy Queen."
Testimony will continue today, with William George, a member of Goldman's board, expected to take the stand.
While Gupta is accused of tipping Rajaratnam about another company on whose board he served, Procter & Gamble, the prosecution is expected to focus on Goldman. And during a jury break yesterday, the prosecution acknowledged that a Goldman banker currently under investigation also tipped Rajaratnam.
David Loeb, whose name first came up at the trial on Tuesday, gave the Galleon chief information about Apple Inc., Hewlett Packard and Intel Corp. But Loeb, a top Goldman salesman identified as "Mr. X" in pre-trial papers in the Galleon case, did not give Rajaratnam information about Goldman, the prosecutor said.
Gupta's defense team is expected to argue that Rajaratnam had a number of potential sources at Goldman and that the government has no direct evidence that he received his information from Gupta.
Aug 25 2014 | 11:21am ET
As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…
Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.