MANHATTAN (CN) – As Rajat Gupta’s trial opened Monday, a federal prosecutor portrayed the former Goldman Sachs board member as a key link to the largest inside trading ring in history, but a defense attorney painted him as a Horatio Alger-type hero falsely accused because of an unfortunate association.
After rising from Indian orphan to a U.S. business titan, Gupta was indicted as a co-conspirator of Galleon hedge fund billionaire Raj Rajaratnam, who was sentenced last year to 11 years in prison and fined $156.6 million.
Spectators filled two courtrooms Monday. Gupta’s family, prosecutors and press filled the courtroom where the proceedings took place, and less-connected spectators filled a room three floors below to watch arguments on closed-circuit television.
Assistant U.S. Attorney Reed Brodsky, one of Rajaratnam’s prosecutors, narrated the lives of both “sophisticated men” in similar terms, from their parallel upbringing and education to their alleged conspiracy “hidden from public view.”
The Sri Lankan-born Rajaratnam graduated from the University of Pennsylvania’s prestigious Wharton School of Business; Gupta graduated from Harvard Business School.
In the wake of the 2008 financial meltdown, Gupta sat as one of 12 board members at Goldman Sachs when investor Warren Buffett pledged a $5 billion investment in the megabank to calm the shellshocked stock market. Prosecutors claim Gupta phoned Rajaratnam with news of the deal minutes after learning about it in the board meeting.
“That wasn’t trading based on skills, research or even rumors,” Brodsky said. “That’s called insider trading.”
Gupta also is accused of feeding Rajaratnam news of the jam-manufacturer Smucker’s acquisition of Folgers from Procter & Gamble months earlier, and other tips.
By currying favor with Rajaratnam, Gupta hoped to increase his investment in Galleon’s Voyager fund, Brodsky said.
Although Rajaratnam jurors reportedly nicknamed Brodsky “Napoleon,” the tenacious prosecutor made his points with cool professionalism and restraint.
Before trial, both parties agreed to focus their arguments on the allegations – not the defendant. Prosecutors promised not to call Gupta “greedy,” and defense attorneys agreed to play down their client’s philanthropic work in AIDS prevention and educational charities.
U.S. District Judge Jed Rakoff warned that he would not tolerate a “Mother Teresa” defense.
As promised, defense attorney Gary Naftalis did not dwell long on Gupta’s charitable works, but spotted a loophole when it came to describing other parts of his client’s biography.
Naftalis’ recitation of Gupta’s life story mirrored the up-from-the-bootstraps style of 19th century children’s book author Horatio Alger.
Born without a “silver spoon” in his mouth, Gupta’s father was a journalist and “freedom fighter” against British colonialism, and his mother died when he was young, Naftalis said.
Winning a scholarship-funded Ivy League education, the plucky Gupta began a “meteoric rise” to the top of McKinsey & Co., becoming the consulting group’s first managing director born outside of the United States, Naftalis said.
In contrast to Brodsky’s unemotional delivery, Naftalis was animated in defense of his client, pulling his glasses off his face to punctuate his remarks like a conductor waving a baton.
Now 63, Gupta “didn’t turn into a criminal in the seventh decade of an otherwise praiseworthy life,” Naftalis said.
The attorney said that Gupta tried to distance himself from Rajaratnam after the Voyager investment began to sour. He claims that prosecutors lacked direct evidence that the two men worked together on anything illicit.
Prosecutors plan to play wiretapped conversations for the jury in which Rajaratnam allegedly alludes to tips from Gupta. Naftalis said the recordings do not mention Gupta by name, and he is not a party to those conversations.
“Our law does not make people criminals based on guilt by association,” Naftalis said. “You need real evidence, hard evidence.”
Naftalis attacked the government’s cooperating witnesses as “bounty hunters,” confessed criminals hoping to “keep themselves out of jail” or “make a little money.”
After the jury left the room, Brodsky complained to the judge about the defense’s soaring portrait of Gupta’s biography.
Judge Rakoff replied that he thought to himself, “Leaping lizards!” during the speech, and found it difficult to understand why Brodsky did not object.
“You looked at me. You looked at your colleague, and then you looked down,” Rakoff said.
Rakoff assured Brodsky that any appeal to jurors’ emotions would fade as they began to absorb approximately three weeks of testimony, which was scheduled to begin this morning (Tuesday).