Bloomberg News

U.S. Says Rajaratnam and Gupta Lawyers May Be Sharing Memos

February 17, 2012

(Updates with details of hearing in second paragraph.)

Feb. 16 (Bloomberg) -- Lawyers for Rajat Gupta, the former Goldman Sachs Group Inc. director charged with insider trading, may have received government memos on two witnesses who testified against Galleon Group LLC co-founder Raj Rajaratnam last year, a prosecutor said.

Assistant U.S. Attorney Reed Brodsky said at a court hearing today in Manhattan that Gupta’s lawyers may already have copies of dozens of memos concerning Anil Kumar, a former partner at McKinsey & Co., and Adam Smith, a former Galleon portfolio manager, based on interviews conducted by agents with the Federal Bureau of Investigation. Kumar and Smith pleaded guilty and agreed to testify against Rajaratnam, who was convicted of insider trading in May.

The memos, known as “302s,” were handed over by prosecutors to Rajaratnam’s lawyer during his trial last year, Brodsky said at the hearing.

“What we didn’t produce and what we didn’t review were Kumar and Smith FBI reports that we produced in the Rajaratnam trial,” Brodsky told U.S. District Judge Jed Rakoff, who is overseeing Gupta’s criminal case as well as a suit filed by the U.S. Securities and Exchange Commission.

‘No Right’

“We’re asking if they received them from Rajaratnam’s counsel,” Brodsky said.

Gupta’s lawyer, Gary Naftalis, said he wouldn’t tell prosecutors if he had the memos. He noted that Rakoff ordered prosecutors last week to turn over the bulk of evidence they had in preparation for the trial, set to begin in May.

“They have absolutely no right to know the answer when they were ordered to do this,” Naftalis said.

Rakoff said he was concerned to learn there may have been sharing of evidence, known as “3500 material,” between Gupta and Rajaratnam. The judge said the while the men are codefendants in the SEC lawsuit filed in October, they aren’t codefendants in the criminal case before him.

“3500 material is normally to be returned at the close of a case,” Rakoff said. “There may be a reason why the court should find out what’s going on. I do have some concern about whether there was such an exchange and whether or not it’s harmless error.”

Phone Conference

Rakoff ordered the lawyers in the case to confer with him tomorrow in a phone conference to resolve the matter.

Gupta, 63, the one-time McKinsey & Co. leader and former director at Procter & Gamble Co., was accused in October by prosecutors in the office of Manhattan U.S. Attorney Preet Bharara of passing inside information to Rajaratnam. The U.S. says Gupta tipped Rajaratnam about Goldman Sachs and P&G earnings.

A revised indictment filed in January expanded prosecutors’ description of the insider-trading scheme, saying it began in March 2007, a year earlier than the U.S. alleged in October when Gupta was first charged.

‘Joint Investigation’

During today’s hearing, David Frankel, a lawyer for Gupta, argued that his team was also entitled to material collected by the SEC, including written reports and interviews conducted by regulators. He argued that prosecutors and regulators had conducted a “joint investigation” of Gupta.

Kevin McGrath, a lawyer for the SEC, said regulators had acted independently of prosecutors and that Gupta’s lawyers weren’t entitled to such information.

Rakoff said he wouldn’t rule on the matter immediately.

In November, Rakoff said Gupta’s lawyer could question Goldman Sachs Chief Executive Officer Lloyd Blankfein and six others under oath.

Frankel said after court that Gupta’s legal team hasn’t interviewed Blankfein and that two other Goldman Sachs employees refused to speak to Gupta’s team.

Rajaratnam, who was convicted by a jury, is serving an 11- year prison term.

The case is U.S. v. Gupta, 11-cr-00907, U.S. District Court, Southern District of New York (Manhattan).

--With assistance from Bob Van Voris in New York. Editor: Peter Blumberg

To contact the reporter on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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