Skip to main content

The Globe and Mail

Gupta on Rajaratnam's 'important people' list, court hears

Former Goldman Sachs director Rajat Gupta arrives at the Manhattan Federal Court in New York May 22, 2012. Mr. Gupta is the most prominent corporate executive charged in the U.S. government's recent crackdown on insider trading. He has denied the charges, and his lawyer says that prosecutors have no direct evidence to win a conviction. Mr. Gupta, 63, is accused of leaking stock secrets to Galleon Group founder Raj Rajaratnam, his erstwhile friend and business associate, who himself was convicted of insider trading last year.

Keith Bedford/Reuters/Keith Bedford/Reuters

Former Goldman Sachs director and McKinsey & Co. executive Rajat Gupta was on a list of "important people" that now-imprisoned hedge fund manager Raj Rajaratnam was willing to be disturbed to take their phone calls, his onetime secretary testified at Mr. Gupta's insider-trading trial on Tuesday.

Former Galleon Group employee Caryn Eisenberg, testifying for the prosecution, also told the Manhattan federal court jury that she saw Mr. Gupta "many times" in the firm's 34th floor Madison Avenue office in 2008 and 2009.

But defence lawyers pointed out that Mr. Gupta was not the only person associated with Goldman Sachs to be included on the list, which eventually identified 10 people during the time Ms. Eisenberg was Mr. Rajaratnam's executive assistant in 2008 and 2009.

Story continues below advertisement

One other name was Goldman managing director David Loeb, who works with technology hedge funds. Mr. Loeb is under investigation but has not been charged with any wrongdoing in the government's broad crackdown on insider trading, according to a source briefed on the case.

Mr. Loeb's name came out under cross-examination, part of Mr. Gupta's defence strategy to show that Mr. Rajaratnam had other potential sources of inside information about Goldman Sachs.

Mr. Loeb would call "just as frequently as the other sales guys," Ms. Eisenberg said in response to a question by one of Mr. Gupta's lawyers, David Frankel.

Mr. Gupta, 63, is the most prominent corporate figure indicted. He denies the charges, arguing the prosecution has no direct evidence such as the dozens of wiretaps used to convict Mr. Rajaratnam a year ago.

Ms. Eisenberg is the first trial witness called by prosecutors to establish the relationship between Mr. Gupta and Mr. Rajaratnam. The trial began on Monday with opening arguments.

The former secretary also testified about a call Mr. Rajaratnam received on Sept. 23, 2008, minutes before the stock market closed. She said Mr. Rajaratnam summoned Galleon co-founder Gary Rosenbach into his office. She testified that she then heard Mr. Rosenbach saying "Buy Goldman Sachs" on his phone.

The date is key to government charges against Mr. Gupta that he leaked word of Warren Buffett's $5-billion (U.S.) investment in Goldman Sachs Group Inc. before it was made public at the height of the financial crisis. Mr. Buffet's investment was announced after the market closed that day.

Story continues below advertisement

Prosecutors say Mr. Gupta called Mr. Rajaratnam 16 seconds after a special Goldman board meeting approved the investment by Mr. Buffett's Berkshire Hathaway Inc. They said Mr. Rajaratnam then ordered his traders to buy Goldman stock with just minutes left in the trading day, reaping illegal profits.

Ms. Eisenberg said the call was from "one of the men who frequently called" and that "it was urgent."

She said that her former boss Mr. Rajaratnam had instructed her "not to disturb him with any calls unless they are on a list of people considered important" so on that occasion, she did put the phone call through to Mr. Rajaratnam.

Mr. Gupta is on trial on charges of tipping Mr. Rajaratnam with confidential information between March, 2007, and January, 2009, while serving on the boards of Goldman Sachs and Procter & Gamble. He spent a 34-year career at management consultancy McKinsey & Co., including nine years as its global head.

The jury, which includes an elementary school teacher, a nurse and a professor, saw a handwritten list of five names – taken from Ms. Eisenberg's notebook – displayed on screens in the jury box. Five other names were added during her employment.

Under the title "important people," Mr. Gupta's name was second on the list. Two people who testified against Mr. Rajaratnam at his trial last year after pleading guilty were also identified. They were former Intel Corp. executive Rajiv Goel and former McKinsey consultant Anil Kumar.

Story continues below advertisement

The charges of securities fraud and conspiracy could lead to a lengthy prison term for Mr. Gupta if he is convicted at the trial, which is expected to last about three weeks. However, it is unlikely to be as punishing as the 11 years handed to Mr. Rajaratnam, who was found guilty on 14 criminal charges.

Defence lawyers say Mr. Gupta and Mr. Rajaratnam had a falling out some time in 2008 and were not as close as Mr. Rajaratnam was to other Wall Street executives. Mr. Gupta's lawyers asked Ms. Eisenberg about a one-night helicopter trip from New York City to Atlantic City, N.J., in February, 2008. Mr. Rajaratnam travelled with Goldman Sachs president Gary Cohn and hedge fund managers but Mr. Gupta was not on the trip, she said.

The case is U.S.A. v Gupta, U.S. District Court for the Southern District of New York, No. 11-907.

Report an error
As of December 20, 2017, we have temporarily removed commenting from our articles. We hope to have this resolved by the end of January 2018. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to