MANHATTAN (CN) – Prosecutors used their closing arguments Wednesday to paint finance executive Rajat Gupta as a traitor who gave his billionaire buddy access to sensitive business plans while shunning the interests of the stockholders whose interests he was supposed to protect.
Gupta, as a board member of Goldman Sachs and Procter & Gamble, helped convicted inside trader Raj Rajaratnam “to make billions in illegal profits,” Assistant U.S. Attorney Richard Tarlowe told jurors. Rajaratnam was sentenced to 11 years in 2011 for orchestrating the largest inside-trading scheme in history.
Gupta faces one count of conspiracy and five counts of securities fraud.
Defense attorney Gary Naftalis opened his summations by highlighting the import and burden of reasonable doubt. He said the government had to prove that Gupta “knowingly and willfully” aided Rajaratnam, not that he simply “negligently trusted someone that he shouldn’t have.”
Closing arguments progressed smoothly and with few objections, atypical in this high-profile trial that has stretched on for the last month. One onlooker described proceedings as “a dog fight,” with each side reluctant to make concessions.
Tarlowe presented summations for the prosecution with precisely executed presentation of highlighted phone records and perfectly cued tape excerpts of conversations taken from its wiretap of Rajaratnam, reflecting the money and man hours the government has invested in this insider-trading case.
The evidence shows a pattern that “time and time again,” moments after Gupta got highly confidential and valuable tip, he called Rajaratnam who in turn made a lucrative trade based on the tip at the first possible opportunity, Tarlowe said.
Naftalis appealed to the jurors’ humanity, saying he would like to “sit down with [them] as people.”
Speaking in a slow, intimate fashion and referring to himself as Gary, he asked jurors if they would want a family member convicted based on the “guesswork” and circumstantial evidence that comprised the government’s case.
“A phone record is not hard, real evidence about what was said,” Naftalis said.
He added that the government needed to rely on phone records because, “after eight months of wiretapping, 18 hours a day, seven days a week, they do not have a single wiretapped conversation where Rajat Gupta gave insider information to Rajaratnam. Because it didn’t happen.”
Each of the government witnesses provided only secondhand testimony about what “probably happened,” but no one who actually heard Gupta give an illegal tip, Naftalis said.
He went on to try to discredit two of the government’s star witnesses, traders Michael Cardillo and Anil Kumar, based on the fact that both have pleaded guilty to insider trading and received reduced sentences because of their cooperation.
By calling them and referring so often to Rajaratnam, the government had tried to make Gupta seem “guilty by association,” Naftalis said, adding that “guilt by association is not against the law.”
Both the defense and prosecution focused on the events of Sept. 23, 2008, which account for two of the five securities fraud counts against Gupta, when Rajaratnam purchased more than $40 million of Goldman Sachs stock in the last minutes of the trading day.
The government’s dramatic reconstruction of the day asserts that at 3:53 p.m., Gupta finished an emergency conference call with the Goldman Sachs board, in which the members leaned that Warren Buffet and Berkshire Hathaway were going to give $5 billion to Goldman Sachs to help right the market, spinning in the early days of the financial crisis, and that the bailout would be announced after the markets closed. With only seven minutes left in the trading day, Gupta then called Rajaratnam’s office at 3:54, allegedly to spill the illegal tip. At 3:56, Rajaratnam began ordering hundreds of thousands of shares of Goldman stock.
Naftalis presented a different narrative of the day’s events, and of each of the days in which an alleged incident of inside trading occurred after Gupta called Rajaratnam. He said Gupta had actually called Rajaratnam at 3:54 to inquire about a fund in which they had invested together, the Voyager Fund. Gupta received an email that day from an investor stating he could not get his hands on Gupta’s $10 million investment in the fund. The government’s wiretap revealed that Rajaratnam had indeed removed more than $25 million from the fund without telling Gupta, who lost his investment.
The defense also sought to discredit another government witness, Goldman Sachs CEO Lloyd Blankfein, by presenting court transcripts in which Blankfein repeatedly said that he had “no specific recollection” about details involving the dates in question, including Oct. 24, 2008, when the Wall Street Journal reported that Goldman Sachs was laying off 10 percent of its staff.
Naftalis claims the layoffs were the subject of an emergency conference call with the board that day, while the government contends that board members learned in that meeting that Goldman stock had dropped $2, and that Gupta passed this information on to Rajaratman.
Naftalis called Blankfein “the man with no memory, including of firing 3,000 people,” painting the CEO as the real bad guy when it came to cheating the everyday investor and the country during the financial crisis.
In a dramatic closing, Naftalis walked away from the microphone and spoke directly to the jury in near a whisper, forcing onlookers to lean forward in their seats to hear. “I ask you to return a verdict of not guilty,” he said. “And if you do, the United States does not lose, because the United States never loses when justice is done.”
Assistant U.S. Attorney Reed Brodsky delivered the government’s rebuttal.
To believe Gupta is not guilty, “you would also have to also believe he is the unluckiest man on earth,” Brodsky said. “He is not the unluckiest man on earth,”
After Brodsky recapped the government’s evidence against Gupta, U.S. District Judge Jed Rakoff informed the court that he would provide the jury with instructions first thing Thursday morning.