The prosecutors have told a US jury that there is “overwhelming” and “devastating” evidence of insider trading against former Goldman Sachs director Rajat Gupta but the defense argued there is no “beef in the case” as the hearing in one of the Wall Street’s biggest scandal wrapped up.
The prosecution and defense presented their closing arguments in the high-profile insider trading trial of Gupta in Manhattan federal court yesterday and the case will now go to the jury,which will get instructions on the law from presiding judge Jed Rakoff.
The group of eight women and four men will then begin its deliberations later today on the fate of Gupta,one of corporate America’s most successful Indian-Americans and the most high-profile Wall Street executive fighting criminal charges in the government’s crackdown on insider trading.
Using graphics,emails,phone records and wiretaps,federal prosecutor Richard Tarlowe summarised for the jury charges and evidence that 63-year-old Gupta “violated his duty” as a Goldman and Proctor and Gamble board member to tip now-jailed hedge fund founder Raj Rajaratnam.
“Gupta abused his position as a corporate insider by providing secret company information to his longtime business partner and friend Raj Rajaratnam,so Rajaratnam could use that information to buy and sell stocks before the investing public,” Tarlowe said in an aggressive tone.
“By doing so,Gupta enabled Rajaratnam to make millions of dollars,” he said.
“Time and time again Gupta betrayed that trust and violated that duty by using the secret information to help Rajaratnam cash in on it,” Tarlowe said. “The evidence against Gupta is overwhelming and devastating.”
Tarlowe said in his summation that Gupta was a “secret pipeline” to Rajaratnam,and “evidence shows that Gupta tipped (off) Rajaratnam periodically in anticipation of receiving multiple benefits in return.”
Gupta has pleaded not guilty to one count of conspiracy and five counts of securities fraud. He faces up to 25 years in prison if convicted.
Gupta’s lawyer Gary Naftalis,speaking softly and slowly,blamed the government of presenting to the jury an “illusion” even though it had no direct evidence against his client.
“With all the power and majesty of the United States government,they found no real,hard,direct evidence,” Naftalis said.
“They didn’t find any because it didn’t happen… As they say in that old commercial,where’s the beef in this case?
“We have had no real first-hand knowledge of the crimes alleged to have been committed here.”
Naftalis said the government in its desperation to build its case presented stacks of documents and “parade of meaningless witnesses” but it is “indisputable” that Gupta did not buy or sell even a single share of Goldman Sachs and Proctor and Gamble.
“No cash changed hands here. No dishonest dimes ended up in Gupta’s pocket,” Naftalis said during his nearly three hours of closing arguments.
“If you put in a lot of paper,you give the illusion that you might have something more than you actually have an illusion of making something out of nothing,” Naftalis argued.
“That is a gambit that can bamboozle people into thinking something was proven when it wasn’t,” Naftalis added.
Naftalis urged the jury to give Gupta a not-guilty verdict if they have even the slightest doubt that he
committed any crime.
“For Gupta,this is the case in which whatever you decide here will mark whatever future he has left,” Naftalis said in a low tone.
“The stakes are much too high here for that kind of shabby information to suffice to take away something from somebody that matters more than anything else in the world,” Naftalis said,referring to Gupta’s freedom and reputation.
“You need real evidence,not speculation and guesswork.”
Concluding his summation,Naftalis recalled going to one of the oldest courthouses in England,where he had read the words “In this hallowed place of justice,the Crown never loses because when the liberty of an Englishman is preserved against false witness,the Crown wins.”
“The United States always wins when justice is done,” Naftalis said.
As Naftalis finished his summations,Gupta choked up and had tears in his eyes and went up to hug his lawyer. Gupta’s wife and four daughters sitting behind him fought back tears.
Gupta has pleaded not guilty to charges of one count of conspiracy and five counts of securities fraud for leaking boardroom secrets from Goldman and P&G to Rajaratnam on eight occasions from 2007 to 2009.
Rajaratnam was convicted of insider trading last year and is serving an 11-year prison sentence in Massachusetts.
Naftalis said Gupta’s professional dealings with Rajaratnam were “legitimate” and he was unaware of the insider trading conspiracy that was being run by Rajaratnam.
“There was a secret world of Raj Rajaratnam that was unknown to Rajat Gupta,” Naftalis said. “Our law does not make people criminals based on guilt by association.”
The prosecution countered that saying the two men had a public side of success “but hidden,concealed from the public,was a different side,a side that committed crimes.”
Tarlowe said the timing of the calls from Gupta’s numbers to Rajaratnam’s offices,just seconds after he got off from Goldman and P&G board meetings,the subsequent trades made by the Sri Lankan co-founder of the Galleon hedge fund before the market close and the millions of dollars of profit made or
losses avoided show a “pattern” of insider trading.
“It’s not another coincidence,” he said.
In his rebuttal following Naftalis’s summations,US prosecutor Reed Brodsky said,”to believe the arguments of the defense team,you’d have to believe that Gupta is one of the unluckiest people in the world. He is not the victim of unlucky coincidences.”
Among the tips the government has accused Gupta of passing to Rajaratnam is Warren Buffett’s five billion dollar investment in Goldman Sachs on September 23,2008.
Naftalis said Gupta had had a falling out with Rajaratnam by then and had no motive to tip him.
Gupta had lost USD 10 million of his investment in the Voyager fund managed by Rajaratnam.
He was “frustrated” with Rajaratnam,whom he believed had taken the money behind his back.
Naftalis said in a September 20,2008 conversation with his daughter,Gupta was “upset” and “stressed” about his loss.
He had been unsuccessful in getting information from Rajaratnam about what had happened to his money and so was calling him incessantly.
Naftalis said the calls made from Gupta’s number to Rajaratnam on September 23 and later were to ask him about his money and not to tip him about Buffett’s investment in Goldman.
The defense has argued that Rajaratnam received tips from other sources at Goldman and P&G and some of the information he got was already in the public domain.
Naftalis also sought to discredit testimony of some of the government witnesses,including that of Goldman Sachs CEO Lloyd Blankfein and ex-Galleon trader Michael Cardillo,who has pleaded guilty to criminal charges and is cooperating with the government.
Naftalis described Cardillo as a person who had agreed to wear a concealed wiretap to a friend’s wedding to extract information and who had admitted in court that he did not want to spend even a day in jail.
Blankfein had testified that he regularly informed the board members about the company’s financial health.
Naftalis said Blankfein “was less than candid” when he said in court he could not recall that on October 23,2008,the Goldman CEO had sent a voice mail to all his staff informing them about a 10 per cent layoff.
Prosecutors allege Gupta had participated in a Goldman board meeting on that October day during when the banking giant had discussed a quarterly loss of two dollars,its first as a public company.
Gupta had then passed that information to Rajaratnam,the government alleges.
Naftalis said the board meeting was to inform directors about the layoffs of 3250 Goldman employees and not about the quarterly loss,which had already been discussed 10 days ago in a separate meeting.
He said Gupta had known about the loss for several days and had not spoken a word about it to Rajaratnam.
Blankfein “falsely claims he can’t even remember firing 3,000 people,as if he does it every day of the week,” Naftalis said,adding that Blankfein is a “man who has no memory of anything.”
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