The New York Times on January 31, 2012 released the following:
“BY PETER LATTMAN
Federal prosecutors expanded their case against Rajat K. Gupta on Tuesday, filing a new indictment that broadens what they claim was an insider trading conspiracy between the former director of Goldman Sachs and Raj Rajaratnam.
In a new charge, the government contends that Mr. Gupta called in to a Goldman board meeting in March 2007 from Mr. Rajaratnam’s offices at the Galleon Group hedge fund. Minutes after the call, he leaked secret information about the bank to Mr. Rajaratnam, the government says.
Gary P. Naftalis, a lawyer for Mr. Gupta, denied the new accusations, saying, “As we have stated from the onset, the government’s allegations are totally baseless.”
Last October, the government charged Mr. Gupta with leaking to Mr. Rajaratnam boardroom secrets about Goldman and Procter & Gamble, where he also served as a director. It was a stunning blow to Mr. Gupta, who as the former global head of the consulting firm McKinsey & Company was one of the world’s most respected businessmen.
His trial is set for April 9 before Judge Jed S. Rakoff in Federal District Court in Manhattan. Mr. Rajaratnam, who was convicted by a jury last May of leading a huge insider trading ring, is serving an 11-year prison term.
The new charges seem to counter one of Mr. Gupta’s main lines of defense. At pretrial hearings, Mr. Gupta’s lawyers have said that the relationship between Mr. Gupta and Mr. Rajaratnam, once close friends and business associates, had soured by 2008, which is when the government said that Mr. Gupta leaked corporate secrets to Mr. Rajaratnam. The lawyers attribute the falling out to a $10 million loss on an investment with Mr. Rajaratnam.
By stretching the conspiracy back to 2007, when the markets were still soaring and Galleon’s investments were performing well, the government appears to be countering the defense that Mr. Rajaratnam had fallen out of Mr. Gupta’s good graces.
In addition, the accusation that Mr. Gupta participated in a Goldman board call from Galleon’s offices suggests a coziness between the two men that Mr. Gupta’s lawyers have sought to debunk.
The additional charges against Mr. Gupta involve both Goldman and Procter & Gamble.
In one new count, prosecutors assert that Mr. Gupta, then a Goldman director, participated in a telephone meeting of the board’s audit committee in March 2007 from Galleon. Mr. Gupta heard a preview of Goldman’s earnings, which were strong and set for release the next morning, the government contends. About 25 minutes after the call, Galleon bought at least $70 million worth of Goldman shares, allowing the fund to profit when the bank’s shares rose the next morning.
In the other added charge, the government asserts that Mr. Gupta called Mr. Rajaratnam from Switzerland after participating in a Procter & Gamble board call and leaked information about the company’s coming earnings release.
Separately, Richard J. Holwell, the federal judge who presided over the trial of Mr. Rajaratnam, is retiring from the bench, according to two people with direct knowledge of the matter who requested anonymity because they were unauthorized to discuss it.
The timing of Judge Holwell’s retirement is unclear, but he is expected to return to private practice. He was a partner at the law firm White & Case before becoming a judge in 2003.
Judge Holwell did not respond to a request for comment.”
To find additional federal criminal news, please read Federal Crimes Watch Daily.
Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition and OFAC SDN Sanctions Removal.
The author of this blog is Douglas McNabb. Please feel free to contact him directly at firstname.lastname@example.org or at one of the offices listed above.