NEW YORK — A former Goldman Sachs director was found guilty Friday of feeding confidential information to a corrupt hedge fund manager, becoming the most prominent defendant convicted so far in a wide-ranging probe conducted by investigators armed with wiretaps.
Rajat Gupta — born in India, educated at Harvard and well-known in corporate America — was convicted by a jury of conspiracy and three counts of securities fraud, and acquitted of two other securities fraud counts. He showed no visible reaction as the verdict was read, though his adult daughters hugged and wept.
The trial of the 63-year-old Gupta, and the one last year for former billionaire Raj Rajaratnam, pulled back the curtain on how the two longtime friends and Wall Street titans navigated the turbulent waters of the 2008 economic meltdown.
The pair had “public sides of success,” said Assistant U.S. Attorney Reed Brodsky said at closing arguments at the closely watched white-collar trial. “But concealed from the public was a different side — a side that committed crimes.”
The prosecutor argued that secret recordings of phone calls between the two men showed that Gupta was so brazen about sharing Goldman board secrets it sounded like “he was talking about what happened at a Yankee game yesterday.”
Defense attorney Gary P. Naftalis countered that the FBI wiretaps, phone records and other evidence presented by the government had only created the “illusion” that legitimate business dealings were somehow sinister.
“That is a gambit that can bamboozle people into thinking something was proven when it wasn’t,” Naftalis told the jury. Outside court, he said he was disappointed in the guilty verdicts.
“Rajat Gupta broke the law, plain and simple,” FBI Assistant Director Janice K. Fedarcyk said in a statement.
Rajaratnam, founder of the $7 billion Galleon hedge fund, was sentenced last October to an 11-year prison term on an insider-trading conviction. Less than a month later, Gupta was charged in a separate case built on the some of the same wiretap and other evidence.
Allegations that Gupta conspired with a convicted white-collar criminal represented a fall from grace: The defendant is a former chief of McKinsey & Co., a highly regarded global consulting firm that zealously guards its reputation for discretion and integrity. He also is a onetime director of the huge consumer products company Procter & Gamble Co.
During the trial that began on May 20, the government highlighted a Sept. 23, 2008, phone call it said was made from Gupta to Rajaratnam. The call came only minutes after Gupta had learned during a confidential conference call about how Warren Buffett’s Berkshire Hathaway planned to invest $5 billion in Goldman — a blockbuster deal that wouldn’t be announced until the stock market closed at 4 p.m.
“That news was going to be very good news for Goldman Sachs,” another prosecutor, Richard Tarlowe said in closing arguments. “The average ordinary investor had no way of knowing that. … Until the announcement, it was confidential.”
The hedge fund manager’s assistant, Caryn Eisenberg, testified at trial that it was the only call her boss received on his private line that day between 3 p.m. and 4 p.m.