Lawyers defending former corporate director Rajat Gupta on insider-trading charges sought on Wednesday to discredit a former hedge-fund trader who agreed to wear an FBI recording device and testify against others.
Gupta, 63, is accused of providing his onetime friend and business associate, Galleon hedge fund founder Raj Rajaratnam, with boardroom secrets between March 2007 and January 2009 while he was a director at Goldman Sachs Group Inc and Procter & Gamble.
Gupta says the prosecution's case is circumstantial and he has pleaded not guilty. The Manhattan federal court trial started on May 21 and is expected to last three weeks.
Defence lawyer Gary Naftalis questioned former Galleon trader Michael Cardillo for several hours, trying to portray him as someone who was seeking leniency for his cooperation with investigators. Cardillo, 35, pleaded guilty to insider-trading related charges in January 2011 but has yet to be sentenced.
The defence lawyer also sought to portray to the jurors that Galleon was a place where money managers exaggerated their contacts and boasted about getting inside information. One key defence argument is that the now-imprisoned Rajaratnam had a host of sources who could have given him tips about companies.
At one point, Naftalis asked Cardillo about George Soros, the hedge fund billionaire.
"You heard, did you not, when you were at Galleon, that Mr. Rajaratnam claimed that he was giving Intel numbers, the numbers -- inside information about Intel to George Soros, do you remember hearing that?" Naftalis asked Cardillo.
The trader responded: "I remember something about Intel and Soros. I don't remember Raj being a part of it."
Michael Vachon, a spokesman for Soros, said the hedge fund billionaire received "no such inside information from Rajaratnam."
On Tuesday, Cardillo said on the witness stand that in early June 2008, one of Rajaratnam's brothers, RK Rajaratnam, also a Galleon money manager, told him P&G, the household products maker, was going to sell Folgers to J.M. Smucker Co.
"He told me the information was coming from Raj's guy at P&G," said Cardillo, who also testified at another Galleon-related insider-trading trial last year.
Under cross-examination on Wednesday, the jury heard that Cardillo secretly recorded another former Galleon trader and friend, Mike Fisherman, and then also attended Fisherman's wedding. Fisherman has not been accused of any wrongdoing.
The defence brought out that when Galleon was wound down following Rajaratnam's October 2009 arrest, Cardillo was paid $1.25 million in compensation. He testified that he bought a Manhattan apartment for $980,000 and paid cash because he could not obtain a mortgage due to his unemployment.
Galleon had $7 billion under management at its peak. Rajaratnam, 53, was convicted a year ago on evidence largely based on court-approved wiretaps of his phones. He is appealing the use of wiretaps as he serves an 11-year prison term.