The Jed-and-Gary show went on the road yesterday.
With Rajat Gupta’s insider-trading trial on a one-day hiatus as U.S. District Judge Jed Rakoff gave a speech in Washington, the 12 jurors and two alternatives had to look elsewhere for humor. Rakoff and his longtime friend, defense attorney Gary Naftalis, dished out a lot of it June 4 in their current venue, courtroom 14B in Manhattan federal.
As lunch hour neared and Naftalis pushed ahead with his cross-examination of a government witness, Rakoff interrupted.
“I don’t meant to cut you off, Mr. Naftalis, and the fact that the jury is getting hungry for their lunch shouldn’t deter you in any respects,” he said. Jurors laughed.
When the same witness was confused by Naftalis’s reference to a list that had been placed into evidence as Exhibit 1786, Rakoff clarified that it was a document number, not a birthdate.
“Even I wasn’t born in 1786,” Naftalis, 70, offered.
“So you allege,” answered Rakoff, 68.
From the jurors, more laughter.
The two were at it again when Naftalis asked the witness, former McKinsey & Co. director Anil Kumar, to testify about the Indian School of Business, which he and Gupta co-founded. Naftalis wanted Kumar to compare the school’s reputation with that of the University of Pennsylvania’s Wharton School and Harvard Business School. Rakoff cut him off, saying it was irrelevant.
“Maybe I should ask about Yale?” Naftalis offered.
Gupta, who ran McKinsey from 1994 to 2003 and was a director at Goldman Sachs Group Inc. (GS:US) and Procter & Gamble Co. (PG:US), is accused of leaking tips to Galleon Group LLC co-founder Raj Rajaratnam. Gupta has pleaded not guilty to conspiracy and securities fraud, which carries a maximum 20-year prison term.
To prove that Gupta had a motive to leak tips, prosecutors have stressed that the two men co-founded an investment firm -- Taj Capital, later renamed New Silk Route LLC, focusing on South Asia. The defense claims Rajaratnam’s interest in the firm faded because it started only a private-equity fund, and not a separate hedge fund.
Testimony on June 4 focused on a document called the “Priority Target List” that Kumar said Gupta and Rajaratnam created to identify potential investors.
The list included foundations, endowments and funds associated with George Soros, Bill Gates, Hank Greenberg, Michael Dell, the Walton family, the Bronfman family, Harvard and Columbia universities and the Kennedy Family Foundation.
It was Gupta’s job to contact individual investors and banks including Goldman Sachs and JPMorgan Chase & Co. (JPM:US), according to the document. Rajaratnam was to contact Paul Tudor Jones and Stan Druckenmiller, who, according to testimony earlier, were members of Rajaratnam’s fantasy football league.
The document includes what it calls “Indicative Investment Amounts.” It reads: “Soros 100”; “AIG 100”; and “Lehman 200.” Next to “CalPers” -- which may be a reference to the California Public Employees’ Retirement System, the largest U.S. pension fund -- the document says “200.” Another document included in the exhibit says Harvard “may be interested up to $100 million.”
Naftalis filed papers yesterday seeking to block prosecutors from presenting evidence about other alleged Goldman Sachs tips that the U.S. says Gupta passed to Rajaratnam. On June 4, while Goldman Sachs Chief Executive Officer Lloyd Blankfein was on the stand, Assistant U.S. Attorney Reed Brodsky sought to question him about a briefing he gave to Goldman Sachs board members about the bank’s profit and loss numbers on May 22, 2008.
Prosecutors allege that after the briefing, someone calling from an unassigned McKinsey telephone Gupta sometimes used telephoned Rajaratnam. The U.S. says it was Gupta who called Rajaratnam and passed material nonpublic Goldman Sachs earnings. Rajaratnam later traded on the tip on May 27, 2008, prosecutors said.
The government is seeking to elicit testimony and evidence about the briefing before the jury.
“That may be a little bit of overkill,” Rakoff told Brodsky. “I’m leaning toward precluding this.”
In a hearing outside the jury’s presence on June 4, Rakoff noted that prosecutors hadn’t included data about the Blankfein briefing or the alleged passing of a tip in their indictment or in the government’s detailed explanation of the criminal charges.
He said he’d consider whether the uncharged acts could be heard by the jury because they may be “probative of Mr. Gupta’s knowledge and intent.”
Naftalis argued against allowing the jury to hear the additional evidence.
“If evidence of the uncharged May acts is admitted, there will be a mini-trial about those acts, which is reason alone to exclude the evidence,” Naftalis said in court papers.
“The jury will necessarily conclude that Mr. Gupta is an inside trader, even though the court has already held that the evidence cannot be admitted for the purpose.”
Ellen Davis, a spokeswoman for the Manhattan U.S. Attorney’s office, declined to comment on the Gupta filing. Rakoff directed prosecutors to also file court papers outlining their argument.
The case is U.S. v. Gupta, 11-cr-00907, U.S. District Court, Southern District of New York (Manhattan).
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