Gupta defence asks: 'Where's the beef?'

Last Updated: Thu, Jun 14, 2012 05:16 hrs

Evidence of insider trading against businessman Rajat Gupta is "overwhelming," a prosecutor told jurors at the trial's close on Wednesday, while a defence lawyer countered that the government had a weak, circumstantial case without direct proof.

Jurors were expected to begin deliberating the charges against Gupta, a former Goldman Sachs Group Inc board member, later on

Wednesday in one of the US government's biggest insider-trading prosecutions in recent years.

Prosecutors said in closing arguments that Gupta had brazenly and illegally passed stock tips to now-imprisoned hedge fund manager Raj Rajaratnam, but the defence argued that the government "had no real, hard, direct evidence" to prove it.

"Where is the beef in this case?" defence lawyer Gary Naftalis asked the Manhattan federal court jury. "We have had no real first-hand knowledge of the crimes alleged to have been committed here."

On Tuesday, lawyers for insider-trading defendant Rajat Gupta played for jurors a 2008 wiretap of now-imprisoned hedge fund manager Raj Rajaratnam apparently confirming he deceived Gupta over a $10 million investment.

The issue is a key part of Gupta's defense to charges he illegally supplied stock tips to Rajaratnam. Gupta's lawyers rested their case in the US District Court trial in New York after the wiretap was played. Closing arguments are scheduled for Wednesday.

"When you take leverage you, you know. My problem is, I'm a big boy. I hope Rajat is a big boy. You know?" Rajaratnam is heard telling Galleon Group portfolio manager Sanjay Santhanam, in a phone call on October 2, 2008.

They were discussing a fund called Voyager Capital Partners raised by Rajaratnam and Gupta.

Santhanam was working on the portfolio at Galleon, the hedge fund founded by Rajaratnam that managed $7 billion at its peak.

"And then I didn't, I, I, I didn't tell him that I took that equity out, right," the jury heard Rajaratnam saying to Santhanam in the recording played in the courtroom.

Prosecutors have accused Gupta of passing tips to Rajaratnam including the $5-billion investment boost for Goldman by Warren Buffett's Berkshire Hathaway in 2008. They have said that Gupta also leaked confidential information when he was on the board of Procter & Gamble. Rajaratnam, founder of the Galleon Group hedge fund and a one-time billionaire, was convicted in the same courthouse last year and is serving an 11-year prison term.

"Rajat Gupta abused his position as a corporate insider by providing secret company information to his longtime business partner and friend Raj Rajaratnam, so Mr Rajaratnam could use that information to buy and sell stocks before the investing public," federal prosecutor Richard Tarlowe told the jury.

"By doing so, Gupta enabled Rajaratnam to make millions of dollars," he said.

"Time and time again Gupta betrayed that trust and violated that duty by using the secret information to help Rajaratnam cash in on it," Tarlowe told the jurors. "The evidence against Gupta is overwhelming."

To win a conviction, prosecutors must prove beyond a reasonable doubt that Gupta betrayed his duties to the companies and that he had something to gain from tipping Rajaratnam. The former board member was not accused of trading in stocks of the companies at the center of the case, but he and Rajaratnam were associates who had several investments together.

Gupta is a retired head of the McKinsey & Co business management consultancy. He joined Goldman's board in 2006 and left in May 2010, seven months after Rajaratnam's arrest. He also is a former director at American Airlines Corp.

He faces a maximum prison sentence of 25 years if convicted on the charges of securities fraud and conspiracy.

Before trial summations started on Wednesday morning, Gupta kissed and embraced his eldest daughter, Geetanjali Gupta, who testified on his behalf on Monday and Tuesday. Gupta's wife, Anita, and his four daughters have been a regular presence in the courtroom throughout trial, now in its fourth week.

At the trial, the jury heard about Gupta's humble beginnings in India and his rise to the ranks of the global corporate elite. They also heard from prosecution star witness Lloyd Blankfein, the Goldman Sachs chief executive, who said all discussions at board meetings were confidential. Blankfein testified against Rajaratnam last year.

The case is USA v Gupta, U.S. District Court for the Southern District of New York, No. 11-907.

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