Thursday, 24 July 2014
Last updated 5 hours ago
May 31 2012 | 10:18am ET
Former McKinsey & Co. chief Rajat Gupta's lawyers hammered away at the credibility of prosecution witnesses yesterday at their client's trial on insider-trading charges.
In a combative cross-examination of former Galleon Group trader Michael Cardillo—which featured as much sparring with prosecutors as it did with the witness—lead Gupta lawyer Gary Naftalis sought to show that Galleon was full of liars and exaggerators, people who puffed up their contacts and their alleged inside information. Cardillo has pleaded guilty to insider-trading and is cooperating with prosecutors, and Galleon founder Raj Rajaratnam, a longtime friend and business partner of Gupta's, was convicted and sentenced to 11 years in prison.
Gupta is charged with passing confidential tips about two companies he served as a director, Goldman Sachs and Procter & Gamble, to Rajaratnam.
In one exchange, Naftalis asked Cardillo if he had heard "that Mr. Rajaratnam claimed he was giving Intel inside information to George Soros," who has denied the allegation. Cardillo said he "remembered something about Soros," but that "I don't remember Raj being a part of it."
Cardillo also testified that he didn't think it was "feasible or probable" that Kraft CEO Irene Rosenfeld was a Rajaratnam source, after Naftalis asked if Rajaratnam had instructed his brother to cooperate. "I didn't think he was ever going to get that information."
But Cardillo said there were only "rare occasions" when people would "exaggerate their sources of inside information" at Galleon's morning meetings.
And Naftalis did not fail to employ one of the oldest strategies in the defense attorney's playbook, implying that Cardillo was testifying to save his own skin.
"You determined to cooperate with the prosecution to better your situation. True?" Naftalis asked.
"Correct," Cardillo replied.
Naftalis' cross was frequently interrupted by prosecutors, who successfully objected that the defense lawyer's questions were based on third-party out-of-court statements. Among the questions struck down were, "Were there others at Galleon who claimed to have sources of inside information that they did not have?"
Those objections weren't the only ill-tempered exchanges between the adversaries.
Prosecutors complained that Naftalis was making jury-audible comments to his fellow defense team members, including saying "Got him" during his questioning of Cardillo. Naftalis shot back that prosecutors were making their objections too long.
U.S. District Judge Jed Rakoff told both sides to cool it. "I think we are down to a very polite form of name-calling," he said, just a day after he implored the lawyers to "sharpen" their presentations so as not to bore the jury.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…