Andrew Burton/ReutersRajat K. Gupta, right, a former Goldman director, arriving at federal court in Manhattan. Mr. Gupta is accused of insider trading.Among the government’s hurdles in its insider trading case against Rajat K. Gupta is proving that he benefited from any illegal trades.
Mr. Gupta, 63, a former head of the consulting firm McKinsey & Company, did not make any direct profits on the trades in question. He lost money on his investment with the Galleon Group, a hedge fund run by Raj Rajaratnam. Prosecutors say Mr. Gupta provided insider tips to Mr. Rajaratnam, who was convicted by a jury last year.
On Thursday, the eighth day of the trial at Federal District Court in Manhattan, the government sought to make its case against Mr. Gupta by showing that he played an active role in Galleon’s business. Prosecutors called to the witness stand Ayad Alhadi, a former executive on Galleon’s marketing team.
To help win business, Mr. Alhadi said he leaned on Mr. Gupta, who in 2008 began helping Galleon raise money and took on the title of chairman of Galleon International. In early 2008, Mr. Alhadi and Mr. Gupta traveled to the Middle East for two days of back-to-back meetings with deep-pocketed investors like the Abu Dhabi Investment Authority and the Emirates Bank.
At least two of the Middle East firms that Mr. Alhadi and Mr. Gupta pitched on their trip invested in Galleon’s funds.
For some investors, a meeting with Mr. Gupta was like having a meeting with a rock star, Mr. Alhadi told government investigators in a pretrial interview, according to the defense. (Mr. Alhadi said he did not recall saying that.) In an e-mail to a banker that was going to help Galleon set up meetings, Mr. Alhadi praised Mr. Gupta’s credentials.
“I will be in the Emirates with Rajat Gupta, a friend and adviser to Galleon,” Mr. Alhadi wrote. “He’s a highly respected global business leader and I know a meeting with him would be very worthwhile.”
In another e-mail, Mr. Alhadi gushed to Mr. Gupta about the reaction of an executive at the National Bank of Abu Dhabi when he heard about Mr. Gupta’s Galleon connection.
“When I told him about your affiliation with Galleon he was extremely impressed,” Mr. Alhadi wrote. “He said it would be an ‘honor to meet you.’ ”
Also on Thursday, prosecutors called Stephen Pierce, a senior executive at Goldman Sachs, to the witness stand to describe the secrecy surrounding some of the information that Mr. Gupta is accused of leaking. Mr. Pierce was actively involved in helping Goldman raise $10 billion in capital on Sept. 23, 2008, during the depths of the financial crisis. The money provided a vital lifeline to Goldman and lifted its stock price. Prosecutors contend that Mr. Gupta, who as a Goldman director had to approve that deal, leaked the information to Mr. Rajaratnam.
Mr. Pierce’s testimony provided some levity and drama to the otherwise tedious proceedings.
He described to the jury that he was called away from the final game at the old Yankee Stadium on Sept. 21 to work on the Goldman deal.
“What was the significance of being there on that day?” asked a prosecutor.
Judge Jed S. Rakoff, a Yankees season ticket holder and die-hard fan who is overseeing the trial, could not resist interjecting.
“As opposed to the significance of being there on any other day?” the judge said, eliciting laughter from the jury.
Mr. Pierce said that he had received a call from his boss about an emergency conference call with the bank’s top executives to discuss strategies for raising capital. He said he was having trouble finding a quiet place at the stadium to have the conversation.
“The only place I could find was a janitorial closet, so that’s where I did the call,” Mr. Pierce said.
Judge Rakoff again interjected, asking Mr. Pierce if he was sure he had not been in the Yankees manager’s office.
Mr. Pierce said that he walked out of the closet, went back to his seats to tell his cousin he had to leave, and then hailed a taxi back to Goldman’s offices. The next two days, he said, were spent working round the clock to get the deal done.
On cross-examination, the defense tried to suggest to the jury that the Goldman news was not as confidential as Mr. Pierce had indicated. Mr. Gupta’s lawyer showed an e-mail that Mr. Pierce sent to his own lawyer — David Scherl at Morrison Cohen — at 5:08 p.m. on Sept. 23, 2008 — about a half-hour before the capital raise was announced.
“Watch the tape,” Mr. Pierce wrote, suggesting that Mr. Scherl look out for a news announcement on the financial wires. “Hard work pays off.”
Right after Goldman released the news, at 5:50 p.m., the lawyer, Mr. Scherl at Morrison Cohen, replied to Mr. Pierce.
“I am psyched for YOU, STUD … well done,” he wrote. “Well done. Feel proud, Buddy.”
Judge Rakoff’s courtroom also had a chance to feature New York’s other baseball team.
Mario M. Cuomo, the former governor of New York, took a seat in the back row of the spectators’ gallery toward the end of Thursday’s proceedings. Mr. Cuomo served as the mediator in the legal dispute between the Madoff trustee and the owners of the Mets.
At 5 p.m., after the Gupta trial broke for the day, Judge Rakoff approved a $162 million settlement between the two sides.