Jury foreman Richard Lepkowski didn’t want to convict Rajat Gupta of insider trading. To him and other jurors, Gupta had lived a “story-book life” and “the American dream,” he said. In the end, though, the case was just too strong.
“I wanted to believe the allegations weren’t true,” Lepkowski, 51, said in an interview yesterday in Manhattan federal court. “Here was a man who came to this country and was a wonderful example of the American Dream.”
“But at the end of the day, those allegations on which we found guilt -- the evidence was overwhelming,” said Lepkowski, a resident of Westchester County, New York, and an executive at the nonprofit Children’s Tumor Foundation.
Gupta, orphaned as a teenager in India, rose to become managing partner of McKinsey & Co. and a director at Goldman Sachs Group Inc. (GS:US) and Procter & Gamble Co. (PG:US) Yesterday, he became the most prominent executive to be convicted in a five-year U.S. crackdown on insider trading at hedge funds.
Jurors weighed the evidence for 9 1/2 hours over parts of two days before convicting Gupta of one count of conspiracy and three counts of securities fraud, the maximum sentence for which is 20 years in prison. They acquitted him of two counts of securities fraud. The trial lasted four weeks.
Two in Tears
When the 12 jurors returned to the courtroom to deliver their verdict at 11:38 a.m., two were in tears.
“I struggled, I’ll be honest with you,” said Ronnie Sesso, 53, a youth advocate who works for New York City’s Administration of Children’s Services, who said she, too, had become emotional in rendering her decision. “I was trying to determine the outcome of this person’s life.”
The verdict came much faster than it did last year in the U.S. case against Galleon Group LLC co-founder Raj Rajaratnam. Then, jurors deliberated for 12 days before convicting Rajaratnam of securities fraud for trading on illegal tips from Gupta and others.
Still, the Gupta jurors said they wrestled with many issues before filing into the courtroom for the last time.
“It’s hard,” said Agnes Sanders, a retired librarian from Manhattan who declined further comment. “I’m sure we reached the right verdict, but it’s hard.”
A constant theme in the deliberations was Gupta’s reputation for integrity and his successes over the course of his life, according to one juror who asked not to be named. Wherever possible, jurors gave Gupta, 63, the benefit of the doubt. They appreciated the passion of the lawyers on both sides, the juror said.
After seven hours of deliberations on the first day, jurors returned to court yesterday not knowing if they’d reach a final verdict by the end of the day, the juror said. It all came together in the morning, and by 11:30 a.m. they had a verdict. Every juror was emotional, the juror said.
Lepkowski and Sesso said a central concern for jurors was motive. The panel discussed why Gupta, who a prosecution witness testified had a net worth of $80 million and had led a stellar business career, would leak tips to Rajaratnam. One reason, they concluded, was that Gupta wanted Rajaratnam’s help building his private equity fund, New Silk Route.
‘Need for Greed’
“What did Mr. Gupta get out of this by giving Mr. Rajaratnam the information? Was it the future, was it cash?” Sesso said. Ultimately, Sesso pointed to Gupta’s “need for greed: ‘I could get away with it once and I’ll do it again,’” she said.
The jurors said Gupta was manipulated by Rajaratnam, who is serving an 11-year prison sentence. Sesso and Lepkowski cited the testimony of Gupta’s former McKinsey protege, Anil Kumar, who pleaded guilty and testified against Gupta. Lepkowski said he found parallels between the way Kumar had been co-opted by Rajaratnam into passing inside information about technology firms he was advising and what happened with Gupta.
“He manipulated Rajat Gupta and Mr. Kumar,” Lepkowski said. “What happened to him almost imitated what happened to Gupta. You can see him playing one off the other.”
Both jurors said they came away with a low opinion of Rajaratnam, who was convicted of making millions of dollars off tips in separate schemes. Sesso called the convicted fund manager “a snake in the grass.”
“Raj Rajaratnam was a very manipulative man, and he made it easy for Rajat Gupta to share this information,” Lepkowski said. “For Raj and Galleon, this was normal operating procedure.”
Ben Harris, a spokesman for Rajaratnam’s lawyer, John Dowd, didn’t immediately return a voice-mail message left at his office seeking comment on the jurors’ statements.
Another issue was the circumstantial nature of the case. Still, Sesso became convinced of Gupta’s guilt after she examined the late-in-the-day timing of phone calls to Rajaratnam and the trades he made immediately afterward.
“The information and then the actions taken,” she said. “It was too many coincidences,” Sesso said, citing phone records that showed Gupta calling Rajaratnam just minutes before the end of trading and the fund managers purchased 217,200 shares of Goldman Sachs stock just two minutes before the market closed.
“We never got comfortable with anything,” Lepkowski added. “The saddest part of the trial for me was the two character witnesses -- one who came from India” to testify for Gupta “and the one who knew him since fifth grade.”
‘Not Enough Evidence’
Jurors didn’t convict Gupta on two counts of securities fraud stemming from two alleged tips he passed that resulted in Rajaratnam’s March 12, 2007, trade on Goldman Sachs stock and the fund manager’s Jan. 29, 2009, trade on Procter & Gamble. Two jurors said they hadn’t found enough evidence to convict on those charges. Prosecutors didn’t have wiretaps of Rajaratnam talking about those trades for both counts.
“There wasn’t the corroborating evidence that there were in the other counts,” Lepkowski said. “In the end we found that there was not enough evidence to convict beyond a reasonable doubt.”
Lloyd Blankfein, Goldman Sachs chairman, testified for the prosecution over three days, telling the jury that discussions he had with board members were confidential. Gupta’s lawyer Gary Naftalis assailed Blankfein, calling him “a man with no memory of anything” and “less than candid.”
Lepkowski said he understood Blankfein wouldn’t have been able to remember specifically what he told Gupta and his fellow directors during board meetings. At one point on the witness stand, Blankfein struck the same pose as one in a photograph in a news article the defense displayed in court, sparking laughter from the jurors.
“I personally appreciated Mr. Blankfein’s levity on the stand because it helped break up the tedium,” Lepkowski said. “I didn’t find him an un-credible or unhelpful witness.”
While Gupta didn’t testify at the trial, jurors were made aware by his lawyer that he’d been an orphan and climbed to the top of the corporate pyramid. Each day, Gupta’s wife, grown daughters and friends filled the first rows in the courtroom gallery.
Their presence wasn’t lost on the panel.
“I can see the love and passion he has for his family,” Sesso said, adding that jurors talked about the charities for which Gupta raised money. “We wanted him to walk, go home to his family and live a very prosperous life.”
The case is U.S. v. Gupta, 11-cr-00907, U.S. District Court, Southern District of New York (Manhattan).
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