MANHATTAN (CN) – An attorney for Rajat Gupta was so confident he had neutralized a key government witness that he exclaimed, “Got him,” and flashed a thumbs-up to his co-counsel within earshot and eyesight of the jury, a prosecutor complained on Wednesday.
Former Galleon trader Michael Cardillo for three days has fielded questions about testimony linking Gupta to inside tips he allegedly gave Raj Rajaratnam, the hedge fund billionaire sentenced last year to 11 years in prison and fined $156.6 million.
Cardillo claims that R.K. Rajaratnam told him behind closed doors that his brother Raj had a “guy on the P&G board” feeding him tips about Procter & Gamble’s financial health and Smucker’s acquisition of Folgers coffee.
Prosecutors hope jurors will believe that Gupta, a former Procter & Gamble and Goldman Sachs board member, is that guy.
Gupta’s attorney Gary Naftalis spent most of his cross-examination attacking the credibility of the witness, who is testifying under a cooperation agreement with the government to reduce his punishment for separate inside-trading crimes.
Under questioning, Cardillo estimated that he met with more than a dozen law enforcement agents over the course of three years, after FBI agents confronted him in the lobby of his former apartment building in 2007.
The 35-year-old former trader cooperated with a federal investigation of the Galleon securities fraud ring, at one point wearing a hidden recorder to snare a friend, Mike Fisherman, close to his wedding day.
Cardillo said that Fisherman put him on a list of “65 to 75” guests, including family members of the bride and groom, invited to a wedding celebration.
Within 3 months of the event, Cardillo said, he secretly taped Fisherman “maybe five” times, and one of those times may have been 10 days before his friend walked down the aisle.
Cardillo acknowledged that the FBI told him to lie to Fisherman to get him talking.
Fisherman has not been accused of wrongdoing.
Naftalis said Cardillo admitted participating in illicit trades in ATI, Clear Channel, 3Com, Kronos, Axcan, Alliance Data and ATI.
By the time he pleaded guilty, prosecutors included just one of these companies in the substantive charges, reducing a maximum 125-year sentence to 25 years, Naftalis said.
In addition, prosecutors will write Cardillo’s sentencing judge a request for leniency.
The Securities and Exchange Commission reduced Cardillo’s potential liability from roughly $731,000 to $58,520, representing his total illicit earnings.
After Galleon was shut down, Cardillo said, he was paid $2.1 million. He said he paid about $980,000 of it in cash for a Manhattan apartment overlooking the East River.
Cardillo said he could not take out a mortgage because he was unemployed.
During earlier questioning, Naftalis probed into the veracity of R.K. Rajaratnam’s alleged statements to Cardillo, suggesting that Galleon employees sometimes lied about where they got their information.
U.S. District Judge Jed Rakoff ruled that the admission of R.K. Rajaratnam’s hearsay statements allowed the defense to admit similar evidence.
Over prosecution objections, Naftalis displayed several analyst reports emailed to R.K. Rajaratnam’s account that conveyed the same information as the alleged inside tips.
According to trial evidence, Galleon’s top analysis for P&G stock John O’Connor recommended that traders “guide down” because the company’s organic sales would slow in 2009.
During prior questioning of Procter & Gamble’s external director Paul Fox, Naftalis displayed the company’s Dec. 4, 2008 “Report on the Business,” indicating that consumers would reduce “pantry inventories” in the wake of the global economic recession.
Naftalis showed Cardillo reports indicating that Merrill Lynch and JP Morgan analysts reached similar conclusions around the same period.
After the jury was excused for lunch, Assistant U.S. Attorney Reed Brodsky complained about Naftalis’s celebration to his co-counsel. The situation devolved as Naftalis threw a different accusation at a comment allegedly made by Brodsky, who reached for a transcript in his defense.
In the tone of a patient father, Rakoff told the attorneys to avoid falling into a “very polite form of name calling” beneath the “superb quality” of their lawyering.
The usually friendly opposing attorneys have been visual foils to each other in appearance in speaking style.
Brodsky, with neatly trimmed hair, stands at 5 foot 9, and reportedly has been called “Napoleon” by jurors because of his tenacity. Naftalis, who has ear-length, disheveled white hair, speaks in a more impassioned and impromptu style.
Tensions calmed Wednesday afternoon, as the young Cardillo finished his testimony.. Another Galleon employee, Ayad Alhali, was expected to testify today.