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'Rajat Gupta threw away his duties'

By Yoshita Singh
Last updated on: May 22, 2012 11:06 IST
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Rajat GuptaFormer Goldman Sachs director Rajat Gupta 'threw away his duties' when he passed confidential company information to hedge fund founder Raj Rajaratnam, a prosecutor told a US court, even as defence argued that the Indian American was not an insider trader and "does not belong in this courtroom".

The trial of Gupta, one of the most high profile Wall Street executives to be charged with insider trading, began in US District Court, Southern District of New York on Monday amid intense media glare.

In his opening remarks to the 12 member jury, Assistant US Attorney Reed Brodsky said Gupta "threw away his duties and responsibilities and broke the law," by sharing insider tips with Rajaratnam, who is currently serving an 11 year prison sentence on insider trading charges.

The case of illegal insider trading "is about this man," Brodsky said facing the jury and pointing his hand toward Gupta "and how he violated his duties and abused his position as a corporate insider".

Gupta flanked by his defence team sat stoically, staring at Brodsky as he accused him of cheating shareholders and "periodically" passing secret information to Rajaratnam.

Gupta's family and a handful of his friends were present in court for day one of the trial, which is expected to last three weeks and could end before June 15.

Gupta's wife Anita sat right behind him in the first bench in the courtroom, surrounded by their four young daughters, who throughout the hearing exchanged glances and occasionally put their arms around their mother in support.

As one of the daughters turned emotional during the prosecution's opening remarks, her mother put her hand around her shoulder and sought to comfort her. Before the opening remarks, Gupta was talking to his family, looking reassuringly at his daughters and holding their hand in his effort to comfort them.

"This is a straightforward case of illegal insider trading," Brodsky said.

Gupta and Rajaratnam are 'men with two sides' -- one as "sophisticated and highly accomplished" executives who studied at America's best business schools and rose to the top of their professions and their other persona is hidden from public view in which they discuss and trade on corporate secrets.

Hitting back at the prosecution, Gupta's lawyer Gary Naftalis said in his opening remarks to the jury that his client is 'innocent' and the charges and allegations are "false".

"He is not an insider trader. He has not cheated anybody.

He does not belong in the courtroom. He is an honourable man with an extraordinary record of honesty and integrity," Naftalis said.

"The wrong man is on trial. He has nothing in the world to do anything with this".

Naftalis said India-born Gupta "was not born with a silver spoon" and a person who has "decades of hard work, lived a lifetime of honesty does not turn into a criminal in the his seventh decade".

"The prosecution has no first hand knowledge of facts, there is no actual and direct, real and hard evidence" against Gupta.

Brodsky said Gupta had a joint investment with Rajaratnam in the Voyager fund. As Rajaratnam's firm Galleon made money, Gupta made financial gains too.

The prosecution gave the jury details of the five occasions that Gupta called Rajaratnam seconds after getting off the phone from one of his company board meetings and sharing "tomorrow's business headlines today".

These instances included the five billion dollars investment from Warren Buffett's Berkshire Hathaway in Goldman, Goldman's quarterly profits and losses and Proctor and Gamble's 2008 sale of Folgers Coffee Co to JM Smucker.

Brodsky said Rajaratnam implemented immediately on the information he received from Gupta making millions of dollars in profits in minutes and similarly avoiding huge losses by his advance knowledge of company stock situation.

Brodsky also detailed a July 29, 2008 call between the two "close friends" in which Rajaratnam asked Gupta about a "rumour" that Goldman is looking to buy a commercial bank.

Brodsky said the call provided "a clear window into how these two men spoke to each other and helped each other out".

The jury will hear from corporate witnesses, see telephone and email records and hear telephone conversations in which Rajaratnam is telling traders he had heard from "somebody on the board of Goldman Sachs" about the firm's key financial information," Brodsky said, adding that Gupta committed a "serious crime which we will prove to you beyond a reasonable doubt".

Image: Rajat Gupta | Photograph: Rediff Archives

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