‘Rajat Gupta threw away his duties’

In his opening remarks to the 12 member jury,Assistant US Attorney Reed Brodsky said Gupta “threw away his duties and responsibilities and broke the law,” by sharing insider tips with Rajaratnam,who is currently serving an 11 year prison sentence on insider trading charges.

The case of illegal insider trading “is about this man,” Brodsky said facing the jury and pointing his hand toward Gupta “and how he violated his duties and abused his position as a corporate insider”.

Gupta flanked by his defence team sat stoically,staring at Brodsky as he accused him of cheating shareholders and “periodically” passing secret information to Rajaratnam.

Gupta’s family and a handful of his friends were present in court for day one of the trial,which is expected to last three weeks and could end before June 15.

Gupta’s wife Anita sat right behind him in the first bench in the courtroom,surrounded by their four young daughters,who throughout the hearing exchanged glances and occasionally put their arms around their mother in support.

As one of the daughters turned emotional during the prosecution’s opening remarks,her mother put her hand around her shoulder and sought to comfort her.

Before the opening remarks,Gupta was talking to his family,looking reassuringly at his daughters and holding their hand in his effort to comfort them.

“This is a straightforward case of illegal insider trading,” Brodsky said.

Gupta and Rajaratnam are “men with two sides” – one as “sophisticated and highly accomplished” executives who studied at America’s best business schools and rose to the top of their professions and their other persona is hidden from public view in which they discuss and trade on corporate secrets.

Hitting back at the prosecution,Gupta’s lawyer Gary Naftalis said in his opening remarks to the jury that his client is “innocent” and the charges and allegations are “false”.

“He is not an insider trader. He has not cheated anybody. He does not belong in the courtroom. He is an honourable man with an extraordinary record of honesty and integrity,” Naftalis said.

“The wrong man is on trial. He has nothing in the world to do anything with this”.

Naftalis said India-born Gupta “was not born with a silver spoon” and a person who has “decades of hard work,lived a lifetime of honesty does not turn into a criminal in the his seventh decade”.

“The prosecution has no first hand knowledge of facts,there is no actual and direct,real and hard evidence” against Gupta.

Brodsky said Gupta had a joint investment with Rajaratnam in the Voyager fund. As Rajaratnam’s firm Galleon made money,Gupta made financial gains too.

The prosecution gave the jury details of the five occasions that Gupta called Rajaratnam seconds after getting off the phone from one of his company board meetings and sharing “tomorrow’s business headlines today”.

These instances included the five billion dollars investment from Warren Buffett’s Berkshire Hathaway in Goldman,Goldman’s quarterly profits and losses and Proctor and Gamble’s 2008 sale of Folgers Coffee Co to JM Smucker. Brodsky said Rajaratnam implemented immediately on the information he received from Gupta making millions of dollars in profits in minutes and similarly avoiding huge losses by his advance knowledge of company stock situation.

Brodsky also detailed a July 29,2008 call between the two “close friends” in which Rajaratnam asked Gupta about a “rumour” that Goldman is looking to buy a commercial bank.

Brodsky said the call provided “a clear window into how these two men spoke to each other and helped each other out”.

The jury will hear from corporate witnesses,see telephone and email records and hear telephone conversations in which Rajaratnam is telling traders he had heard from “somebody on the board of Goldman Sachs” about the firm’s key financial information,” Brodsky said,adding that Gupta committed a “serious crime which we will prove to you beyond a reasonable doubt”.

The defence and prosecution will begin calling witnesses in the case today.

As the day’s proceedings ended,Gupta hugged and kissed his daughters who looked at him with hope. the family walked out of the courtroom together with one of Gupta’s daughters putting her hand on her father’s shoulder.

Gupta’s lawyer greeted his daughters with a remark,”He is a good guy,isn’t he” to which she replied yes with a smile.

In his 45-minute long opening remarks,Brodsky said Gupta and Rajaratnam spent time together,discussing Gupta’s future role in the Galleon hedge fund.

“They had a close relationship,together they offered each other more than they could achieve individually,like power and networking.

Gupta believed he could achieve new heights,” the prosecutor said adding that Rajaratnam was tipped directly by Gupta,the “ultimate corporate insider at Goldman Sachs”.

As a board member,Gupta was aware that he could not talk about secret company information with outsiders but he “broke the very same rules he had put in place”.

“Gupta and Rajaratnam had an unfair advantage over average ordinary investors who did not have access to the secret information,” and this conspiracy continued from March 2007 to early 2009.

During the financial crisis,Gupta lost 10 million dollars in Voyager following which he stopped seeking benefits from Rajaratnam,Brodsky added.

“They both went separate ways. But it did not undo what had happened and it does not erase the tips that Gupta passed on” to him.

“Use your common sense,” the prosecutor told the jury,”and you will be clear that Gupta tipped Rajaratnam and is guilty as charged”.

Naftalis counterargued that Gupta did not indulge in any insider trading and did not buy or sell a single stock.

“There is not any evidence that he gave insider information to Rajaratnam,” he said adding that the prosecution is presenting before the jury incomplete and “cherry picked” second and third hand “hearsay”.

Referring to the crucial July 29,2008 call,Naftalis said no trading resulted from this conversation and the information that Rajaratnam had asked Gupta about Goldman considering to buy a commercial bank,the company’s top brass had itself publicly discussed and broadcast it.

“The information was reported by the media and analysts wrote about it. It was not a secret”.

“Rajaratnam had sources all over the town giving him information,” Naftalis added.

Rajaratnam was wiretapped seven days a week for 10 months and in the thousands of pages of records,not a single point to the fact that Gupta shared any information with him.

The prosecution’s case is based on “speculation,guess work,suspicion and conjecture”.

“You cannot make people criminal based on rumour,suspicion and conjecture. Hard evidence is required,” Naftalis said,adding that stakes are high in the case and the prosecution has to prove its case with evidence and not with “could,should and would haves”.

Pointing towards Gupta,the father of four daughters,Naftalis said his client “sits here innocent” and the prosecution has not shown the jury the entire image but a photo that has been cropped.

“Gupta has an extraordinary character,he has never been accused of anything in his life”.

Naftalis said two of Gupta’s daughters are graduating from Harvard Business School and Brown University this week.

Gupta had no motive to deviate from a lifetime of integrity and become a criminal in the twilight of his life.

“He did not receive any payoffs from Rajaratnam,” with whom he instead lost 10 million dollars.

Naftalis told the jury that Gupta had legitimate reasons for speaking with Rajaratnam.

Goldman Sachs was earning millions of dollars as a result of its relation with Rajaratnam and wanted to expand its business with him.

Goldman was “desperate” not to lose him as customer.

Instead,it was Rajaratnam who was involved in secret insider trading which was “concealed” from Gupta,a law abiding person.

“Just because you know someone does not mean you did something wrong”.

Naftalis said prosecutors had taken “a series of innocent,unconnected acts and put them together and put a bad spin,twist on otherwise innocent facts”.

He noted that Gupta was not accused of making any trades or receiving any secret payoffs or payments in what was “a very,strange insider trading case”.

The prosecution is “second guessing” people into guilt. Gupta had a falling out with Rajaratnam,who was investing nearly 40 million dollars of his money “behind Gupta’s back”.

“Gupta believed Rajaratnam had not dealt fairly with him. He was very unhappy with Rajaratnam. It defies common sense that someone who has been treated like this,had been betrayed,” would share secret information with that person.

Gupta was telling other people how he had lost money with Rajaratnam.

Naftalis said in the wiretaps the prosecution is talking about,Gupta’s name has not even been mentioned.

“Rajaratnam is only boasting of sources of information he did not have”.

The witnesses expected to be called today are Rajaratnam’s personal assistant Caryn Eisenberg,FBI agent Thomas Zukauskas,and official at McKinsey Carolann Shields.