Tipping the odds

The high risk of taking the stand in person could pay off for Rajat Gupta. The smart money says the former McKinsey boss and Goldman Sachs director won’t testify at his insider trading trial, which starts on Monday in New York. But the prosecution’s case is largely circumstantial, leaving him plenty of room to explain.

Sure, such a move could backfire. Imprisoned chief executives like WorldCom’s Bernie Ebbers, Tyco’s Dennis Kozlowski and Enron’s Jeffrey Skilling probably wish they’d clammed up at trial. All fell into the common trap of giving testimony that was at odds with pre-trial comments. They came off as liars.

But Gupta’s case is different. He isn’t known to have made any statements, except to jailed insider trader Raj Rajaratnam in a wire-tapped call about a Goldman board meeting. Prosecutors say that conversation, and three others in which Rajaratnam allegedly talks about him, prove he illegally shared confidential information.

Gupta’s lawyers may argue that the information discussed in the first conversation was public. But it’s up to him to explain how Rajaratman’s bragging in the other three calls about tips from a Goldman friend couldn’t have been about him. He also needs to say what certain other calls — unrecorded, but suspiciously timed — were actually about. Doing so credibly in person could make a difference.

Meanwhile, a pillar of Gupta’s defence is that he and Rajaratnam had a falling-out before any of these phone calls, so passing on tips would not have benefited him, an essential requirement for an insider trading conviction. A personal appearance might shed useful light on the relationship between the two men.

Perhaps most significant, Gupta’s reputation for integrity was solid until his indictment. And he earned it hauling himself up from a difficult childhood in India to the blue-blooded American establishment. A story like that could carry enormous weight if told in his own words.

Of course, Gupta would risk prosecutors exploiting any inconsistencies or undisclosed past indiscretions. And his lawyers will almost certainly wait to see how the prosecution’s case unfolds before deciding whether to put him on the stand. But with the public lusting for a boardroom scalp, this is no time to play it safe.