Was Rajat Gupta a “pipeline” for illegal insider trading tips, or the innocent target of an empty prosecution? The latest trial in one of Wall Street’s biggest scandals in a generation wrapped up Wednesday in New York.
Prosecutors and the defense painted starkly different portraits of the brilliant Indian-born businessman caught in the wide-ranging probe centered on the Galleon hedge fund.
Assistant US Attorney Richard Tarlowe said in his summation at the end of the three-week trial that Gupta was a “secret pipeline” to Galleon founder Raj Rajaratnam, who was sentenced in 2011 to 11 years for insider trading.
Gupta, who held senior positions at Goldman Sachs, Procter & Gamble, and McKinsey & Co, was friends with the hard-charging trader Rajaratnam. Prosecutors say that friendship became a corrupt partnership.
“Rajat Gupta abused his position as a corporate insider,” Tarlowe told the packed federal court in New York, where Gupta, 63, sat with his lawyer and, behind him, his wife and four daughters.
“Gupta had a legal duty not to disclose secret information…. Time and time again, Gupta betrayed that trust and violated that duty,” Tarlowe said. “The evidence shows that Gupta tipped (off) Rajaratnam periodically in anticipation of receiving multiple benefits in return.”
Tarlowe went over what he called “devastating” evidence that Gupta on several occasions fed Rajaratnam highly confidential news, including advance notice of the $5 billion that legendary investor Warren Buffett put into Goldman at the height of the 2008 US banking crisis.
According to Tarlowe, Gupta stood to profit from Rajaratnam’s own success, because he had sizeable investments in Galleon.
“Gupta had a direct financial stake in Galleon,” he said. “What was good for Rajaratnam and Galleon was good for Gupta.”
Tarlowe said Gupta’s veteran attorney, Gary Naftalis, could deny this “until he’s blue in the face.”
At his turn, Naftalis spoke softly, urging the jury to disregard the “rhetorical” nature of Tarlowe’s comments and not to convict Gupta on “shabby information” that never amounted to hard evidence.
“You need real evidence, not speculation and guesswork,” he said. “Rajat Gupta never did any insider trading.”
Naftalis reeled off a list of the resources devoted by the government in the Galleon probe: FBI investigators, an eight-month wiretap of Rajaratnam’s phone conversations, subpoenaed phone and trading records, and informants.
“With all the power and all the majesty of the United States government, they were unable to find any real direct evidence,” he said. “And they didn’t find it, because it didn’t happen.”
Naftalis said that Gupta not only failed to profit from any alleged insider trading, but lost a $10 million investment he placed with Rajaratnam and was furious at the Sri Lankan-born trader.
Gupta is charged with conspiracy and securities fraud. He faces up to 25 years in prison if convicted on all charges.
Gupta called 'pipeline' for insider trades
