Published May 21, 2012
Opening arguments began Monday afternoon in the high-profile trial of Rajat K. Gupta, a former director at Goldman Sachs and Procter & Gamble, accused of insider trading.
Assistant U.S. Attorney Reed Brodsky, the chief prosecutor in the case, said the government plans to call former Goldman banker Byron Trott to the stand this week.
Federal prosecutors have also hinted they may call other notables like Goldman Sachs CEO Lloyd Blankfein as well as Berkshire Hathaway’s Warren Buffett. Their names were included in court filings by federal prosecutors and defense lawyers made public May 17.
Gupta is charged with five counts of securities fraud and one count of conspiracy. If convicted, he faces up to 25 years in prison. He has pleaded not guilty.
Earlier Monday, a jury of 12 New Yorkers and four alternates were chosen. They include a fourth grade teacher, a physician’s assistant and an executive at a nonprofit. The four man, eight woman group also includes a psychiatric nurse and a freelance beauty consultant. They’ll decide whether Gupta leaked confidential information about Goldman and P&G to former Galleon hedge fund manager Raj Rajaratnam.
Dressed in a dark suit Gupta arrived at the federal courthouse in Manhattan around 8 a.m. He did not respond to questions from the media.
Inside, he played an active role in the jury selection process, discussing with his team of attorneys who to accept and who to strike. The defense also hired a jury expert from Doar Litigation Consulting to weigh in. Additional staffers at the law firm Kramer Levin Naftalis & Frankel in New York researched potential jurors in real time as their names were called.
The prosecution objected to the defense’s use of lawyers and jury consultants outside the courtroom but U.S. District Judge Jed Rakoff ruled the extra help was ok and would expedite potential conflicts that may come up.
By 3 p.m., the jury had been seated and opening arguments began.
At the heart of the government’s case are claims Gupta tipped his former friend Rajaratnam to a $5 billion investment by Berkshire Hathaway in Goldman Sachs during the 2008 financial crisis and Goldman’s surprise fourth-quarter loss that year.
The government says Rajaratnam also told a Galleon portfolio manager in June 2008 that a P&G board member had told him that the company was selling its Folgers business to J.M. Smucker. J.M. Smucker says it has cooperated with prosecutors and says CFO Mark Belgya will testify at Gupta’s trial if called.
Until now, Rajaratnam had been the biggest catch in the government’s wide-reaching investigation into an insider trading ring that’s netted more than two dozen prosecutions of white collar criminals. The Galleon founder was convicted in May 2011 and is serving an 11-year prison sentence, the longest ever in an insider trading case. He was found guilty on 14 criminal counts.
On a global scale, a conviction against Gupta would be much more significant. The Indian-born businessman is the former chief of McKinsey & Co., a highly regarded international consulting firm that zealously guards its reputation for discretion and integrity. The 63-year-old Westport. Conn., resident is also known for his philanthropy worldwide.