NEW YORK (Reuters) - A New York federal judge on Thursday damped hopes that he would throw out government wire tap evidence in the insider trading trial of Rajat Gupta, a former board member of Goldman Sachs (GS.N) and Procter & Gamble (PG.N).
Gupta, a one-time global head of the McKinsey & Co consultancy firm, is the most prominent corporate executive charged in the U.S. government’s investigation of Wall Street insider trading, a probe that used secretly recorded phone conversations as evidence. Dozens of hedge fund managers, lawyers and executives have been convicted since 2009 in the sweeping prosecution.
Gupta, 63, was indicted in October and is scheduled to go on trial in Manhattan federal court in April on charges that in 2008 and 2009 he passed on secrets from Goldman and P&G board meetings to hedge fund founder Raj Rajaratnam, a friend and business associate who traded on the information.
Rajaratnam is serving an 11-year prison sentence following his conviction by a jury in May on evidence largely based on phone taps.
Government investigators recorded at least two discussions between Rajaratnam and Gupta. The former board member’s lawyers asked U.S. District Judge Jed Rakoff to suppress the recordings from being heard by a jury, even though the judge in the Rajaratnam trial had allowed them to be used.
“This is a different defendant and he may be entitled to be heard on this issue but looking at it realistically, if I were the defense I would not be too optimistic about this particular motion,” Rakoff said at a pre-trial hearing on Thursday.
Gupta’s main lawyer, Gary Naftalis, declined comment after the hearing, where Gupta sat expressionless with his team of lawyers. Gupta has pleaded not guilty to the charges, and Naftalis has previously said that the accusations are based on circumstantial evidence.
In court on Thursday, Naftalis described the indictment as “vague and mumbo-jumbo” and an “unusual insider trading case.” He said Gupta “didn’t trade, didn’t profit and there were no kickbacks.”
Naftalis had filed motions on Tuesday seeking to suppress the wiretaps and dismiss some charges in the indictment. He also asked the government for more specificity of the charges.
A U.S. prosecutor, Richard Tarlowe, told the judge that the government may file a revised indictment by the end of January that would spell out how Gupta benefited from his association with Rajaratnam.
The government contends that Gupta provided Rajaratnam with advance knowledge of Warren Buffett’s $5 billion investment in Goldman at the height of the 2008 financial crisis, as well as information about Goldman’s surprise fourth-quarter loss in 2008 and P&G’s quarterly earnings in late January 2009.
Gupta was also accused of telling Rajaratnam in June 2008 about the sale of P&G’s Folgers coffee unit to J.M. Smucker Co (SJM.N).
The case is USA v Gupta, U.S. District Court for the Southern District of New York, No. 11-907.
Reporting by Grant McCool