Lawyers for former Goldman Sachs Group Inc board member Rajat Gupta on Wednesday tried to use phone records to sow doubt at his insider-trading trial about contact with now-imprisoned hedge fund founder Raj Rajaratnam. Gupta, 63, a onetime global head of McKinsey & Co management consultancy, is charged with securities fraud and conspiracy in US District Court in New York over allegations he leaked boardroom secrets to Rajaratnam and his Galleon Group between March 2007 and January 2009. Phone records introduced to the jury by prosecutors showed that Gupta's phone and Rajaratnam's phone connecting numerous times in 2007 and 2008. A Goldman employee, Joe Yanigisawa, verified the records but was then asked by a defense lawyer about certain telephone connections between the Galleon office and another number assigned to Goldman Sachs employee David Loeb in New York. He confirmed numerous calls between Loeb and Rajaratnam or one of his traders, Adam Smith, on the sheets of phone numbers. A main defense argument is that Rajaratnam had sources other than Gupta to provide him confidential company information. Smith has pleaded guilty in the case. Rajaratnam was convicted at trial a year ago. Galleon was a client of Goldman Sachs and Loeb was one of the sales executives who dealt regularly with the hedge fund, according to trial evidence. Loeb, who has not been charged with any wrongdoing, could not be reached to comment. A Goldman Sachs spokesman, Michael DuVally, declined to comment. On Thursday, Goldman Sachs Chief Executive Lloyd Blankfein, who started testifying on Monday but did not finish, will resume his testimony.
The jury had a free day on Tuesday because Judge Jed Rakoff went to Washington, D. C., to speak at an annual conference for compliance and regulatory lawyers and officers. Tips on Goldman at center of trial Gupta denies the charges that he tipped Rajaratnam while serving on the boards of Goldman and Procter & Gamble . The defense says the government's case is circumstantial and speculative. On the third day of the trial on May 23, a prosecutor told the judge during a jury break that Loeb provided Rajaratnam with information about Intel Corp , Apple Inc and Hewlett Packard , but nothing about information on the trades at the center of the Gupta case. One of the prosecution's allegations is that Gupta tipped Rajaratnam about a deal that gave Goldman a $5-billion boost from renowned investor Warren Buffet at the height of the financial crisis in September 2008, in an illegal breach of his fiduciary duties. Prosecutors contend that Gupta tipped Rajaratnam 16 seconds after a conference call in which the Goldman board approved the Buffett investment, just minutes before markets closed at 4 p.m. on September 23, 2008. Rajaratnam then hurriedly ordered his traders to buy Goldman stock, reaping $840,000 in profits when the stock rose the next day, according to trial evidence. The Buffett investment was not made public until two hours later. Alson on Wednesday, a former Galleon portfolio manager, Isvari Mahadeva, testified that Gupta stood to profit from investments he made in funds managed by now-imprisoned Rajaratnam. He was convicted at trial last year and is serving an 11-year prison term, which was the longest for insider trading until a lawyer was sentenced on Monday to 12 years in Newark, New Jersey. Whether Gupta, 63, actually profited is in dispute at the trial. Gupta's lawyers say he lost all of a $10 million investment with Rajaratnam and that Gupta, a multimillionaire, had nothing to gain financially by passing corporate secrets to the fund manager. The case is USA v Gupta, US District Court for the Southern District of New York, No. 11-907.