UPDATE 1-Daughter, old friends testify at Gupta insider trial

Mon Jun 11, 2012 6:21pm EDT

* Ex-Goldman director denies tipping Rajaratnam

* Closing arguments in trial delayed until Wednesday

* Gupta calls up to six character witnesses to testify

By Grant McCool

NEW YORK, June 11 (Reuters) - Having decided not to take the witness stand at his insider-trading trial, former Goldman Sachs Group Inc board member Rajat Gupta on Monday called longtime friends and his eldest daughter to testify on his behalf.

Gupta's daughter, Geetanjali Gupta, 33, had barely begun answering questions from a defense lawyer in U.S. District Court in New York when a prosecutor's objection led to a long conference at the judge's bench, one of many that have punctuated and prolonged a trial now in its fourth week.

Gupta, 63, is charged with securities fraud and conspiracy over allegations he illegally breached his fiduciary duties by passing corporate secrets to former Galleon Group hedge fund manager Raj Rajaratnam, his one-time friend. Gupta denies the charges and his lawyers argue that the government has a weak, circumstantial and speculative case.

Gupta's main lawyer, Gary Naftalis, had begun questioning Geetanjali Gupta about a conversation she had with her father in September 2008 about an investment with Rajaratnam when the government objected.

Geetanjali Gupta works for the Harvard Management Company, a wholly owned subsidiary of Harvard University that manages the university's endowment. Her testimony is expected to resume on Tuesday. Her mother, Anita, and her three sisters have attended the trial daily.

The delay pushes back closing arguments in the case to Wednesday from Tuesday because the defense has other witnesses to call and evidence to submit to the jury on its side of the case.

Prosecutors rested their case on Friday.

Earlier on Monday, two longtime friends of Gupta's testified as character witnesses.

"I have always observed since my childhood days that Rajat is straightforward, direct, truthful and inspires trust," said Anil Sood, 62, who was an official with the World Bank in Asia and Africa for 30 years and grew up with him in India. "I have seen him consistently demonstrate these values."

Gupta is calling up to six character witnesses as part of defense efforts to bring to the jury's attention his longtime standing as a philanthropist as he also rose to the top tier of the corporate world. Gupta headed the McKinsey & Co business management consultancy for nine years and served on several corporate boards, including Goldman Sachs and Procter & Gamble Co.

Prosecutors say Gupta abused those board positions by supplying Rajaratnam with stock tips involving Goldman and Procter & Gamble information between March 2007 and January 2009.

The defense also called a former Galleon manager, Richard Schutte, to testify about various sources the hedge fund relied on for its trades.

If convicted, Gupta faces a possible maximum of 25 years in prison. Rajaratnam was convicted at trial 13 months ago and is serving an 11-year prison sentence.

REASONABLE DOUBT

In order to convict Gupta, prosecutors have the burden of proving to the jury beyond a reasonable doubt that he defied his duties to the companies and that he had something to gain from tipping Rajaratnam, a onetime friend and business associate.

Expectations of Gupta himself taking the witness stand rose on Friday when Naftalis said in court it was "highly likely" his client would testify. But in a letter on Sunday, the defense told U.S. District Judge Jed Rakoff that Gupta would not be a witness.

Another of Gupta's friends, Ashok Alexander, traveled from New Delhi to take the witness stand. Alexander testified he met Gupta in 1986 at McKinsey and later worked with him in different contexts, including with the public health foundation of India.

Alexander, 58, the country manager for the Bill & Melinda Gates Foundation in New Delhi, said he considers Gupta "to be a friend, but also a mentor and occasional coach."

Another associate, Suprotik Basu, 34, told the jury he met Gupta in May 2007. Basu has worked for the United Nations Secretary-General's special envoy for malaria since January 2008. He recalled receiving "an urgent call about a businessman who wanted to end all childhood deaths from malaria by 2025" apparently referring to Gupta.

At the start of Monday's proceedings, Rakoff angrily demanded that a defense lawyer quickly tell him who the next witness was. Rakoff has frequently shown impatience with the pace of the trial, which began on May 21 and had been scheduled to run three weeks. It is now in its fourth week.

The judge also said that he would limit closing arguments, for each side to three hours "to address jurors and the remaining portions should be addressed to the sidewalk."

The case is USA v Gupta, U.S. District Court for the Southern District of New York, No. 11-907.