Wed June 13, 2012
Jury To Deliberate In Gupta Insider Trading Case
Originally published on Wed June 13, 2012 6:32 pm
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The fate of a wealthy and well-connected businessman is about to be put in the hands of a New York jury. Both legal teams have made their closing arguments in the federal trial of Rajat Gupta. He's the former head of the McKinsey & Company consulting firm and is accused of taking part in an insider trading scheme.
As WNYC's Ilya Marritz reports, Gupta's case hinges on what the jury makes of his relationship with another Wall Street heavy hitter, a man already convicted of insider trading.
ILYA MARRITZ, BYLINE: It was once a close friendship between two self-made men from South Asia: Raj Rajaratnam, a heavyset Sri Lankan billionaire with his own hedge fund, and Rajat Gupta, a respected former CEO of McKinsey, who was born in India. In 2008, the two men talked frequently by phone.
(SOUNDBITE OF RECORDING)
RAJAT GUPTA: Hey, Raj, how is working from Connecticut?
RAJ RAJARATNAM: It's good. I get more work done.
MARRITZ: Rajaratnam, the second voice on this government wiretap, is now serving an 11-year prison sentence. And Gupta, who placed the call, is on trial for allegedly passing his friend secrets about Goldman Sachs and Procter & Gamble, two corporations where he served on the board. The jury heard that recording. But the heart of the prosecution's case is drier paper evidence: call logs and records of stock trades. Fordham University law professor Steve Thel says when you connect the dots, a pattern emerges.
STEVE THEL: You have information that very few people knew about, that by all accounts, everyone who did know about it knew it was supposed to be confidential. And a set of telephone calls coming very close to the time of information and trades following very quickly thereafter is fairly powerful circumstantial evidence.
MARRITZ: In one instance in September 2008, Gupta allegedly called his friend just seconds after a Goldman Sachs conference call had ended and minutes before the stock market closed to tell him that investor Warren Buffett was putting $5 billion into Goldman Sachs. Rajaratnam immediately bought $43 million worth of Goldman stock. The next day, the news became public, and Rajaratnam made a million-dollar profit, prosecutors say. In closing arguments, Gupta's attorney tried to poke holes in the government's case.
He said the friendship between these two men had soured by the time of the alleged tips over a bad investment where Gupta lost $10 million, and he no longer trusted Rajaratnam. And if they had the power to tap phone calls, how come investigators never produced a smoking gun? All the evidence was circumstantial. Margaret Finerty, a former judge and prosecutor, says that may be true, but it doesn't mean the evidence is weak.
MARGARET FINERTY: If you have enough of it and it is strong, it is persuasive, in my experience, I have found that it can often be more compelling than direct evidence.
MARRITZ: The charms that helped Gupta on his way to the top of the corporate world were on display each day in court. Gupta chatted occasionally with the courtroom artist and always had a large number of family and friends sitting in the benches behind him. When his attorney finished his arguments, Gupta patted him on the back. It's now up to 12 men and women to determine whether this corporate insider was also an inside trader. For NPR News, I'm Ilya Marritz. Transcript provided by NPR, Copyright NPR.