NEW YORK (Reuters) - Lawyers for insider-trading defendant Rajat Gupta on Tuesday played for jurors a 2008 wiretap of now-imprisoned hedge fund manager Raj Rajaratnam apparently confirming he deceived Gupta over a $10 million investment.
The issue is a key part of Gupta’s defense to charges he illegally supplied stock tips to Rajaratnam. Gupta’s lawyers rested their case in the U.S. District Court trial in New York after the wiretap was played. Closing arguments are scheduled for Wednesday.
“When you take leverage you, you know. My problem is, I‘m a big boy. I hope Rajat is a big boy. You know?” Rajaratnam is heard telling Galleon Group portfolio manager Sanjay Santhanam, in a phone call on October 2, 2008.
They were discussing a fund called Voyager Capital Partners raised by Rajaratnam and Gupta. Santhanam was working on the portfolio at Galleon, the hedge fund founded by Rajaratnam that managed $7 billion at its peak.
“And then I didn‘t, I, I, I didn’t tell him that I took that equity out, right,” the jury heard Rajaratnam saying to Santhanam in the recording played in the courtroom.
Prosecutors say Gupta abused board positions at Goldman Sachs Group Inc (GS.N) and Procter & Gamble (PG.N) by supplying Rajaratnam with stock tips, including a $5 billion investment boost for Goldman by Warren Buffett’s Berkshire Hathaway (BRKa.N) at the height of the financial crisis.
To win a conviction, prosecutors have the burden of proving to the jury beyond a reasonable doubt that Gupta defied his duties to the companies and that he had something to gain from tipping Rajaratnam, a onetime friend and business associate.
Gupta, who is a retired head of the McKinsey & Co business management consultant, argues he had no reason to illegally leak financial information to Rajaratnam and that the government’s case is circumstantial. They also said Rajaratnam had other sources at Goldman Sachs who could have given him tips.
U.S. District Judge Jed Rakoff on Tuesday ruled as “completely inadmissible hearsay” a defense attempt to introduce wiretap evidence of a Goldman Sachs employee giving Rajaratnam secrets about companies other than the investment bank.
Rajaratnam was convicted by a jury in the same courthouse 13 months ago, largely on evidence gathered through court-approved FBI wiretaps of his phone conversations. He is serving an 11-year prison term.
The charges of securities fraud and conspiracy against Gupta carry a maximum possible prison sentence of 25 years.
The prosecution rested its case on Friday at the end of the trial’s third week. Gupta did not take the witness stand, so his defense has largely consisted of several character witnesses testifying to his honesty and integrity.
Gupta’s eldest daughter, Geetanjali Gupta, also testified for her father on Tuesday, describing his stress over the Voyager investment in September 2008.
“He was upset, he was stressed, running his hand through his hair and he is usually a very calm and collected person,” she told the 12 jurors and two alternates, who include a teacher, a nurse, a retired librarian and a marketing manager.
She said that over Thanksgiving at her parent’s house in Westport, Connecticut, in late November, the investment was a topic of conversation. She said her father was “depressed, withdrawn and not himself.”
Assistant U.S. Attorney Reed Brodsky quietly asked Geetanjali Gupta whether she loved her father. “Yes,” she said.
The prosecutor then asked her if she would “do anything” for him.
“Yes, I would do anything for my father but I would not lie though on the stand,” she replied.
The character witnesses, including a childhood friend, were called as part of defense efforts to bring to the jury’s attention his longtime standing as a philanthropist as he rose to the top tier of the corporate world. However, the judge has limited how much the jury can hear of Gupta’s contributions of time and money to causes such as fighting AIDS, tuberculosis and malaria in developing countries.
The case is USA v Gupta, U.S. District Court for the Southern District of New York, No. 11-907.
Reporting By Grant McCool; Editing by Maureen Bavdek