Gupta Trial Focuses On Goldman

May 25 2012 | 3:24am ET

Prosecutors continued to build their case that former McKinsey & Co. chief Rajat Gupta passed Galleon Group founder Raj Rajaratnam confidential tips about the companies on whose boards he served yesterday at Gupta's trial.

The government called a McKinsey technology and security manager to explain records from Sept. 23, 2008, when Goldman Sachs struck a deal with Berkshire Hathaway to have the latter invest $5 billion in the bank. The document showed both Gupta's participation in the Goldman board conference call about the investment and a two-minute call to Rajaratnam seconds after the Goldman call ended.

Prosecutors have alleged that Gupta told Rajaratnam about the Berkshire deal, allowing Galleon to buy hundreds of thousands of Goldman shares before the market closed minutes later. Goldman announced the Berkshire deal a few hours after the close, earning Galleon more than $800,000 in illicit profits.

While the government has thousands of wiretaps involving Rajaratnam, they didn't manage to record the short call between Rajaratnam and Gupta that day. But they did play for the jury a discussion between Rajaratnam and a Galleon trader the following day.

On the tape, Rajaratnam is heard telling Ian Horowitz, who was out of the office on Sept. 23, "I got a call, right, saying something good's gonna happen," Rajaratnam said. He then told Horowitz that he ordered Galleon traders to stock up on Goldman shares at 3:58, three minutes after he got off the phone with Gupta and two minutes before the market closed.

Another witness, Goldman board member William George, also testified yesterday, telling the jury that it is against Goldman policy to discuss board meetings with outsiders. He also confirmed that Goldman had discussed buying a commercial bank at a June 2008 meeting; jurors heard a tape of a Gupta-Rajaratnam conversation from a month later discussing that discussion, although prosecutors have not charged Gupta with any wrongdoing in that case.

While most of the four-day-long trial has focused on Goldman, Gupta is also accused of passing tips about Procter & Gamble to Rajaratnam. Yesterday, J.M. Smucker Co. CFO Mark Belgya took the stand to discuss his company's talks to acquire Folgers Coffee from P&G.

Belgya told the jury that details of the deal, the largest in Smucker's history, were supposed to be kept confidential, even after the Smucker board had approved it. Smucker even had a code word for the talks, Project Moon.

A public announcement of the deal was moved up by a day after The Wall Street Journal reported the possible transaction.

In addition to talk of alleged insider dealing, prosecutors also sought to head off an expected argument from Gupta's defense lawyers that their client's friendship with Rajaratnam had deteriorated by the time the government claims he started tipping the now-imprisoned hedge fund manager. The prosecution introduced a 2007 e-mail from Gupta to a McKinsey director calling Rajaratnam "one of the most outstanding hedge fund managers and a very close friend."

Also yesterday, U.S. District Judge Rakoff dismissed a juror due to his father's declining health. That juror, a design and organizational behavior professor, had notified the judge on Wednesday that his father, who lives in France, had suffered a stroke. Yesterday morning, the juror was dismissed and replaced with an alternate, a retired librarian.

Another juror's planned root canal will send the court home early today, in advance of the three-day holiday weekend. The trial will resume on Tuesday. Former McKinsey director Anil Kumar, who pleaded guilty to tipping Rajaratnam and who was a friend of both Rajaratnam and Gupta, is expected to testify on one of those days.


In Depth

Q&A: High Conviction, Low Correlation

Oct 30 2014 | 7:35am ET

Acadian Asset Management's numbers are big: over $70 billion in assets under management...

Lifestyle

Ex-Hedgie Steyer Gives $56M To Climate Action Super PAC

Oct 28 2014 | 9:23am ET

Retired Farallon Capital founder Tom Steyer has poured almost $56 million into his...

Guest Contributor

Hedge Funds Weather A Data Management Perfect Storm

Oct 22 2014 | 12:28pm ET

From a regulatory standpoint, nearly every development since the crisis has placed...

 

Videos

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

October 2014 Cover

Demeter: Family affair

David and James Hamman launched their fundamental Livestock and Grains Program in March of 2010 but it really was decades in the making.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.