Peter Foley/Bloomberg NewsRajat K. Gupta, a former Goldman Sachs board member, is fighting charges that he leaked information.Federal prosecutors have recordings of a Goldman Sachs executive leaking confidential information about technology stocks to Raj Rajaratnam, the former hedge fund billionaire convicted of insider trading, a lawyer disclosed Friday during a court hearing.
The evidence emerged during a pretrial hearing at Federal District Court in Manhattan in the case of Rajat K. Gupta, a former board member at Goldman who is facing charges that he leaked secret boardroom discussions about the bank to Mr. Rajaratnam, who is serving an 11-year-prison term.
Gary P. Naftalis, a lawyer for Mr. Gupta, said during the hearing that the government has secretly recorded telephone conversations of a Goldman executive tipping off Mr. Rajaratnam to confidential information about Intel and Apple.
“The wrong man is on trial,” Mr. Naftalis said.
Mr. Gupta’s lawyers are expected to use evidence of that Goldman insider to argue that prosecutors have falsely accused their client. A trial is set for May 21 before Judge Jed S. Rakoff.
Two Goldman executives, David Loeb and Henry King, are under investigation as part of the government’s vast insider trading inquiry. Mr. Loeb, a salesman, and Mr. King, a technology stock analyst, had frequent dealings with Mr. Rajaratnam and his colleagues at his Galleon Group hedge fund.
A spokeswoman for the United States attorney’s office in Manhattan, which is prosecuting the case, declined to comment.
The news of the recordings of a Goldman executive leaking inside information comes during a challenging week for the bank. An employee resigned publicly with an Op-Ed article in The New York Times criticizing Goldman’s culture, which he described as being “as toxic and destructive as I have ever seen it.”
The charges against Mr. Gupta, the former global head of the consulting firm McKinsey & Company, have riveted Wall Street and corporate America. Once one of the world’s most admired businessmen, Mr. Gupta was brought down when the government accused him of leaking to Mr. Rajaratnam secret information about Goldman and Procter & Gamble, where he also served as a board member.
Judge Rakoff has had a busy schedule involving some prominent cases this week.
On Thursday, a federal appeals court issued a rebuke of Judge Rakoff’s recent rejection of the Securities and Exchange Commission’s settlement of a fraud case against Citigroup because the deal had allowed the company to avoid admitting any wrongdoing.
The United States Court of Appeals for the Second Circuit said that Judge Rakoff had overstepped his judicial authority in rejecting a settlement by an agency of the executive branch.
During Mr. Gupta’s hearing, Judge Rakoff made a sarcastic reference to the appeals court’s opinion. When he told the lawyers how much time they had to make their arguments, he explained that it would be more time than they would have been allotted in the Second Circuit.
“Of course I have nothing but the highest opinion of the Court of Appeals,” Judge Rakoff said wryly.
On Monday, Judge Rakoff begins presiding over a trial pitting the trustee in the Madoff bankruptcy against the owners of the New York Mets.
The Mets owners, who were large investors with Mr. Madoff, are accused of being willfully blind to numerous red flags that signaled the fraud.