NEW YORK (Reuters) - A person at Goldman Sachs Group Inc, who has not been identified or charged in a broad U.S. insider-trading probe, was caught on a wiretap leaking secrets about Intel Corp and Apple Inc, a lawyer for former Goldman board member Rajat Gupta said in court on Friday.
Lawyer Gary Naftalis, in a heated exchange with U.S. prosecutor Reed Brodsky during a pre-trial hearing, said the Goldman person leaked confidential information about the two companies to Raj Rajaratnam, the Galleon Group hedge fund founder convicted of insider-trading charges last year.
Gupta, the best-known corporate executive accused in a sweeping prosecution of insider-trading at hedge funds in recent years, denies criminal charges that he tipped Rajaratnam with Goldman Sachs and Procter & Gamble Co secrets between 2007 and 2009. His trial is scheduled to begin in May.
“In a letter he (Brodsky) said the government had a person who provided confidential information to Raj Rajaratnam about Apple and Intel,” Naftalis said. “There is also wiretap evidence, substantial evidence of another source at Goldman Sachs.”
Naftalis told U.S. District Judge Jed Rakoff that the defense believed “there is a much more circumstantial case that person should be sitting in the box rather than us” and “the wrong man is on trial here.”
A theme of Gupta’s defense is that the charges brought by U.S. prosecutors last October are circumstantial and that Rajaratnam had a host of sources tipping him with information. A jury convicted Rajaratnam largely on wiretaps, which traditionally have been used in organized crime and narcotics cases, not white-collar investigations.
Rajaratnam, once a friend of Gupta‘s, is serving an 11-year prison sentence. Gupta was onetime global head of McKinsey & Co and sat on the boards of several companies.
The judge ended the late afternoon hearing in Manhattan federal court, but Brodsky and Naftalis continued to argue. Brodsky declined to comment.
A Goldman Sachs spokesman, Michael DuVally, declined to comment.
Goldman has been in the spotlight this week with the public resignation of employee Greg Smith, who said in a New York Times op-ed that Goldman had become “as toxic and destructive as I have ever seen it” and was a place he no longer wished to work.
A person familiar with the Gupta case said in early March that prosecutors are investigating David Loeb, a managing director of Goldman Sachs. Loeb works with technology hedge-fund employees, including an Asia-based analyst, Henry King, who is also under investigation, according to another source briefed on the case.
The sources declined to be identified because the matter is not public. Neither Loeb nor King has been accused of any wrongdoing and neither responded to emails asking for comment.
The insider-trading case has drawn in Goldman Sachs Chief Executive Lloyd Blankfein, who was interviewed under oath on February 24 as a witness, according to court documents.
Blankfein testified for the government at Rajaratnam’s trial. He is also expected to be called as a witness by the government at Gupta’s trial.
The cases are USA v Gupta in the U.S. District court for the Southern District of New York No. 11-907
Editing by Andre Grenon, Gary Hill