On Day 6, the US government continued to build its case that Rajat Gupta, former global head of McKinsey & Co. passed on confidential information about The JM Smucker's Co. acquiring Folgers Coffee from Procter & Gamble Co. in June 2008.
FULL COVERAGE:Rajat Gupta trial
Gupta, who served on the P&G board, allegedly told Raj Rajaratnam, co-founder of the Galleon Hedge Fund LLP, about the acquisition before the deal went public on June 4, 2008. Rajaratnam, who was convicted for insider trading in 2011, is presently serving an 11 year prison term - the longest ever for this crime.
This is the second week of the legal proceedings against Gupta, who has been charged with securities fraud and conspiracy for passing confidential information about P&G and Goldman Sachs Group Inc. where he also served as a director.
Highlights of trial:Day 1 | Day 2 | Day 3 | Day 4 | Day 5
Government witness Michael Cardillo, a former Galleon trader who has pleaded guilty to insider trading, told the jury that he was directed by Ragakanthan Rajaratnam (RK), Rajaratnam's brother to buy Smucker's shares in June 2008. Cardillo said that RK had told him that "the information was coming from Raj's guy in P&G". He recalled standing in RK's office during that conversation.
Gupta's lawyer Gary Naftalis registered several objections to the prosecution's questions posed to Cardillo. "Did you believe what you were doing was illegal," asked Assistant US Attorney Richard Tarlowe. Naftalis objected to the question but the witness replied "yes" before the Judge Jed Rakoff could decide whether to overrule or sustain the objection. Since he eventually overruled, the judge asked the 12-member jury to disregard Cardillo's answer.
Rakoff has, several times in a good-rumored manner, chided the lawyers for their litany of objections and sidebars that are slowing the proceedings.
Cardillo has already testified that RK had told him to sell P&G shares in 2009 based on confidential information that the company's shares were going to lose value in the first quarter of 2009. "He was hearing it from Raj's guy in the P&G board," he said, last week.
Earlier in the day, Gupta's counsel tried to convince the jury that predictions about P&G's share value falling were already available in the public domain. During his cross-examination of P&G's Chief Financial Officer Jon R. Moeller, Naftalis asked him about analyst reports that were saying that P&G's shares would take a dip in 2009 since people were spending less on household products due to the slump in the economy.
Cardillo is a critical government witness for establishing that Galleon trades on P&G and Smucker's were based on insider information. But the prosecution is still trying to establish that "guy" is Gupta. The defendant's counsel says the prosecution's entire case is based on circumstantial evidence.
Naftalis told Judge Rakfoff that Cardillo's cross-examination could last up till four hours on Wednesday-the longest yet. Naftalis started his questions on Tuesday by getting Cardillo to explain the insider trading schemes he has been involved in since 2006.
In one scheme, Cardillo received $50,000 from another Galleon trader Craig Drimal in return for making trades for him based on confidential information that Drimal was getting from a third conspirator Zvi Goffer, also an ex-Galleon trader. While Drimal has pleaded guilty, Goffer nicknamed "Octopussy" was found guilty of insider trading in 2011.
Judge Rakoff scolded both the prosecution and Gupta's counsel for the number of exhibits and slides with emails, reports and trade records that the jury were being bombarded with. "I am in awe of the jury because they have managed to stay attentive," he said.
The judge, however, added that expecting the jury to go through several 1,000 documents while making their decision was asking for too much. "We need to find a way to sharpen presentation…move it along," he advised the lawyers.