Rajat Gupta's wealth in spotlight at trial
In April 2008, a private banker at JPMorgan Chase visited her prized clients, Anita and Rajat Gupta, at their home in Westport, Conn, an elegant waterfront estate that was once owned by the retail executive JC Penney.
The banker, Heather Webster, reviewed the prodigious wealth accumulated by Gupta, a former global head of McKinsey & Company, the elite management consulting firm. His net worth at the time, according to Webster's notes from the meeting, was $84 million. An irrevocable trust was valued at $38 million. He also had about $11 million in cash.
But for the prosecutors who have accused Gupta of insider trading, the most important thing written down by Webster during the meeting were a few lines about the Galleon Group hedge fund:
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"Chairman Galleon International, $1.3 billion, 15 per cent owner, invests in long/short equity in Asia, entitled to performance fees."
Gupta, 63, a former director of Goldman Sachs and Procter & Gamble, is on trial facing charges that he leaked secret information about those two companies to Raj Rajaratnam, the Galleon co-founder who was convicted by a jury last year.
The government is hoping that Webster's notes will help convince the jury that Gupta benefitted from inside tips they say he gave to Rajaratnam - a necessary element of an insider trading crime. Gupta did not make any direct profits from Rajaratnam's illegal trading, but prosecutors have argued he had a vested interest in Galleon's success in various ways.
Webster, who works in JPMorgan's Chicago office, read her notes to the jury on Friday morning in Federal District Court in Manhattan in the courtroom of Judge Jed S Rakoff.
The defence had argued - outside the presence of the jury - that Webster's notes should not be admitted because they could give the jurors a false impression about Gupta's dealings with Galleon. Gupta's lawyers maintain that Gupta had a superficial role there and no formal arrangement was ever reached. Judge Rakoff, however, ruled that the testimony could be introduced.
On cross-examination, the defence asked Webster to read to the jury the section of her notes that pegged Gupta's assets at more than $130 million. She also reviewed details of his "income streams," which included $6 million in pay from McKinsey in 2008, $700,000 a year as a Goldman director and $300,000 a year from two different companies where he served as a board member.
Such evidence, presumably, is meant to suggest to the jury that Gupta had no motive to engage in any insider trading scheme, given his fortune.
Gupta had also told Webster, according to her notes, that he wanted to give 80 per cent of his assets to charity. But while his wealth was fair game, Judge Rakoff prohibited testimony about Gupta's philanthropic intentions, saying such evidence was too prejudicial.
"The annals of white-collar crime in this district are filled with people who wanted to make themselves respected, powerful members of society by giving to charity," Judge Rakoff said.
Taking the stand in the afternoon was Anil Kumar, a former McKinsey executive who pleaded guilty to providing Rajaratnam with inside information on a client's merger deals and other news. Kumar has been cooperating with the government shortly after his October 2009 arrest and testified at Rajaratnam's trial.
On Friday, he described to the jury meetings in 2007 that he had with Gupta and Rajaratnam during which they discussed starting an investment fund together. Gupta was on the verge of retiring, and his post-McKinsey plans included building a large money management firm, Kumar said.
The fund they discussed forming, called Galleon Global Group, or G3, was to be an arm of Galleon, but it never came to fruition. Kumar said that Gupta's planned role in the venture would be one of "a sponsor, a wise man, a strategy person, a raiser of funds, those kinds of things."
Those meetings took place behind closed doors in Rajaratnam's office, which was separated from Galleon's trading floor by a sliding glass partition. A prosecutor asked Kumar to describe the trading floor.
"It was noisy, a lot of people screaming and shouting," said Kumar, "and sounding pretty high testosterone."
The trial will enter its third, and most likely final, week on Monday. Among the remaining witnesses that the government plans to call is Lloyd C Blankfein, the chief executive of Goldman Sachs.
©2012 The New York Times News Service
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First Published: Jun 03 2012 | 12:02 AM IST