NEW YORK (AP) — A former Goldman Sachs board member deliberately fed secrets about the banking giant to a close friend and fellow Wall Street heavyweight who used the information to make a killing on the stock market, a prosecutor said Wednesday in closing arguments at the board member's insider trading trial.
Rajat Gupta "abused his position as a corporate insider," Assistant U.S. Attorney Richard Tarlowe said in federal court in Manhattan. "Gupta violated his duty to keep that information confidential by giving that information to Raj Rajaratnam."
Tarlowe zeroed in on a Sept. 23, 2008, phone call from Gupta to Rajaratnam, the once-wealthy founder of the $7 billion Galleon hedge fund who was convicted last year of insider trading charges.
The call came only minutes after Gupta had learned during a confidential conference call about how Warren Buffett's Berkshire Hathaway planned to invest $5 billion in Goldman — a blockbuster deal that wouldn't be announced until the stock market closed at 4 p.m.
"That news was going to be very good news for Goldman Sachs," Tarlowe said. "The average ordinary investor had no way of knowing that. ... Until the announcement, it was confidential."
Records show that moments after the two men's phone call ended at 3:55 p.m., Rajaratnam purchased $40 million in Goldman stock — a trade that ended up making him nearly $1 million.
The hedge fund manager's assistant, Caryn Eisenberg, testified at trial that it was the only call her boss received on his private line that day between 3 p.m. and 4 p.m.
"That evidence is devastating for the defendant. ... If you believe Ms. Eisenberg, it's over — the defendant is guilty," Tarlowe said.
Also played at trial was a wiretap of a July 2008 phone call during which Rajaratnam grilled Gupta about whether the Goldman Sachs board had discussed acquiring a struggling bank like Wachovia or an insurance company
"Have you heard anything along that line?" Rajaratnam asked Gupta.
"Yeah," Gupta responded. "This was a big discussion at the board meeting."
Both men where sophisticated enough to know it was wrong to discuss board business, yet Gupta casually spilled secrets "as if he was talking about what happened at a Yankee game yesterday," Tarlowe said.
The prosecutor argued that Gupta was motivated to help Rajaratnam because he had a financial stake in Galleon, telling jurors, "What was good for Raj Rajaratnam was good for Mr. Gupta."
Gupta, 63, was an orphaned teenager in India before gaining prominence in corporate America. The Harvard-educated defendant is the former chief of McKinsey & Co., a highly regarded global consulting firm that zealously guards its reputation for discretion and integrity.
Gupta has pleaded not guilty to charges of conspiracy to commit securities fraud and securities fraud. His attorneys say all his business dealings were legitimate.
The defense was to give its closing argument later in the day on Wednesday.
Rajaratnam is serving an 11-year prison sentence.