U.S. wants Gupta insider trading jury to hear Rajaratnam calls

Tue May 1, 2012 1:04am EDT
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By Grant McCool

NEW YORK (Reuters) - Prosecutors want the jury in May's insider trading trial of former Goldman Sachs director Rajat Gupta to hear three secretly-recorded phone conversations of Galleon Group hedge fund founder Raj Rajaratnam as evidence of the purported conspiracy between them.

In a pre-trial filing in Manhattan federal court on Monday night, the government said two of Rajaratnam's conversations with his principal trader and another with Galleon's then portfolio manager showed Gupta leaked Goldman board secrets at the height of the financial crisis in 2008. The calls were recorded by the Federal Bureau of Investigation.

"Rajaratnam's statements in these three recorded conversations are essential evidence of the insider trading charges against Gupta in this case," prosecutors Reed Brodsky and Richard Tarlowe wrote to U.S. District Judge Jed Rakoff.

The government said Gupta had passed the Goldman information to Rajaratnam in earlier phone calls that were not part of the FBI's wiretap surveillance of Rajaratnam, who is serving an 11-year prison term, the longest handed down for insider trading, after his conviction at trial a year ago.

A spokeswoman for Gupta's lawyer, Gary Naftalis, declined to comment on the government's motion. Defense lawyers have until May 11 to respond. The trial is scheduled to start on May 21.

Gupta, also a former global head of McKinsey & Co, is the highest-ranking corporate executive to be charged in a broad U.S. crackdown on insider trading at hedge funds in recent years. Dozens of people have pleaded guilty or been convicted at trial.

Gupta is accused of providing inside tips about Goldman and Procter & Gamble board meetings to Rajaratnam in 2007 and 2008. Rajaratnam was recorded by the FBI discussing the Goldman information with trader Ian Horowitz and portfolio manager David Lau.

The indictment said Gupta gave Rajaratnam advance knowledge of a $5 billion investment in Goldman by Warren Buffett's Berkshire Hathaway Inc at the height of the 2008 financial crisis, Goldman's surprise fourth-quarter 2008 loss, and P&G's quarterly earnings in late January 2009.   Continued...

File photo of Rajat Gupta, (C) a former director of Goldman Sachs Group Inc., in New York with his lawyers, February 7, 2012. REUTERS/Brendan McDermid