On Day 16, the prosecution and defence counsel presented their closing remarks in the trial of retired global head of McKinsey & Co., Rajat Gupta, who is charged with insider trading.
US government lawyers said that Gupta passed confidential information about Goldman Sachs Group Inc. and Procter & Gamble Co., while serving as a director on the boards of the two companies, to billionaire Raj Rajaratnam, co-founder of the Galleon Hedge Fund, who was convicted of insider trading last year and is now serving an 11-year-prison term.
"He tipped Mr Rajaratnam over and over again," Assistant US Attorney Reed Brodsky told the 12-member jury, who will decide Gupta's fate. "He is not a victim."
The prosecution summarised, in less than three hours, all the evidence they had produced over the first three weeks of the trial. They laid out a pattern, from 2007 to 2009, which involved an important event or quarterly earnings announcement at Goldman Sachs or P&G, followed by phone calls being exchanged by the two men, following which Galleon bought or sold stocks.
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If the defence is to be believed, Brodsky sarcastically said, that Gupta is the "unluckiest man in the world". "It just so happened" that Gupta called Rajaratnam 23 seconds after an October 23, 2008 board meeting of Goldman Sachs, the government lawyer continued in a sarcastic tone.
The government has accused Gupta of telling Rajaratnam that the investment bank would report a fourth quarterly loss, which allowed Galleon to sell Goldman Sachs shares to avoid losses. A recorded call made the day after the board meeting has Rajaratnam saying: "I heard yesterday from somebody who's on the board of Goldman Sachs, that they are gonna lose $2 per share. The street has them making $2.50."
"It just so happened," Brodsky continued that Gupta called Rajaratnam at 3:54 and 3:55 pm on September 23, 2008, a minute after getting off a Goldman Sachs board meeting call. The Goldman Sachs shares, which Galleon purchased at 3:56 pm and 3:57 pm, yielded a profit of more than $1.2 million and constituted 18 per cent of the Goldman Sachs shares purchased that day.
"It just so happened," Brodsky repeated over and over again, and finally concluded that Gupta "isn't unlucky" but was in a conspiracy with Rajaratnam. "It takes two to tango," he said.
Defence counsel slams Blankfein
In his summation, defence lawyer Gary Naftalis repeatedly told the jury that the US government had "no real hard evidence". "Where's the beef," asked Naftalis, suggesting that the prosecution's case was based on "speculation and guesswork".
While the prosecution has to prove its case beyond reasonable doubt, the defence counsel only has to sow the seed of reasonable doubt in the jury's mind. Since they are no wiretaps of the conversations on September 23 and October 23, Gupta's lawyers have chastised the prosecution for building a case on circumstantial evidence.
Naftalis told the jury that Gupta was calling Rajaratnam not to pass on insider tips but to find out what was happening in their joint-fund Voyager Capital Partners Ltd. The defence counsel has argued that the two men were on bad terms in 2008 because Rajaratnam's mismanagement of the Fund cost Gupta his entire investment of $10 million.
During his closing remarks, Naftalis also slammed Goldman Sachs Chairman Lloyd Blankfein as a government witness who "didn't have any memory of anything".
Blankfein had told the court that the information, which Gupta had allegedly leaked, was confidential and that he had not authorised the defendant to divulge anything. The Goldman Sachs CEO, however, could not remember specifics of meetings or calls placed to directors in 2007 and 2008 to update them on the firm's status.
The Goldman Sachs CEO, under oath, also said that he did not recall firing 10 per cent of the workforce in October 2008. "Mr Blankfein was being less than candid," said Naftalis, urging the jury not to rely on the testimony of a witness who claims to not remember anything. "Nobody can be that cold and callous," he added, referring to the firing.
The defence counsel is trying to establish that Blankfein called Goldman Sachs directors on October 23 to tell them about the lay offs, which had already leaked to the press, and not about quarterly earnings.
Naftalis told the jury told that Gupta learned about the quarterly loss as early as October 13 during a special board call, and if he wanted to leak this to Rajaratnam, there was no need for him to wait for 10 days.
Brodsky, however, countered that William George, a Harvard Business School professor and Goldman Sachs director, recalled learning about the fourth quarterly loss on a board call on October 23, and the October 13 discussion was on the financial crisis.
A hard fought case
On Thursday, Judge Jed Rakoff is expected to read his final instructions to the jury, which will help them during their deliberations.
Rakoff described the four weeks of the trial as "hard fought" and thanked them for "well-tried case". The judge said that he expected "continuation of that high quality".
The only case for Gupta
Naftalis wrapped up his summation on a sentimental note. The lawyer told the jury that in a few weeks time this case would be "dim memory" for them. "For Rajat Gupta, this is the only case," he said.
Gupta's wife and four daughters sat behind him in the public gallery. Two girls sat on either side of their mother. After Naftalis completed, the family was overcome with emotion with tears springing to their eyes. Gupta turned around and kissed them.
When approached by this reporter for a reaction at the end of day, Gupta politely said, "Not yet."