At a pretrial conference yesterday in Manhattan federal court, Assistant U.S. Attorney Reed Brodsky said prosecutors expect to present testimony from Steven Peikin, a lawyer at Sullivan & Cromwell who advises New York-based Goldman Sachs.
Peikin’s testimony “will relate to certain statements made by Mr. Gupta in an interview,” Brodsky told U.S. District Judge Jed Rakoff, without providing other details.
Brodsky’s comments came at the close of a hearing in which Rakoff said he’s likely to allow prosecutors to introduce as evidence four wiretaps from 2008 that are critical to the government’s case.
In one, Gupta is heard discussing Goldman Sachs business with Galleon Group LLC co-founder Raj Rajaratnam, who is now serving an 11-year prison term for insider trading. In three others, Gupta isn’t a participant as Rajaratnam discusses stock trades with his employees.
Prosecutors say Rajaratnam made the trades based on Gupta’s leaks. Rakoff said the three wiretaps may show Rajaratnam, as one member of an insider-trading conspiracy, referring to tips he got from Gupta, who prosecutors say is another member of the scheme.
Gupta isn’t identified on the wiretaps, and the defense denies that Rajaratnam is discussing him. Rajaratnam isn’t expected to testify at the trial.
“I think that they are admissible subject to connection, in terms of being in furtherance of the conspiracy,” Rakoff said at the hearing, referring to the three calls where Gupta isn’t a participant.
Gupta, who ran consulting firm McKinsey & Co. from 1994 to 2003, is scheduled to go on trial May 21 for tipping Rajaratnam about earnings at Goldman Sachs and Procter & Gamble Co. (PG), where Gupta was also a director. He has pleaded not guilty to five counts of securities fraud and one count of conspiracy.
Prosecutors said at yesterday’s hearing that their first witness will be Caryn Eisenberg, who was Rajaratnam’s assistant at Galleon. They didn’t say when they would call Peikin, who didn’t return a telephone call yesterday for comment.
Michael DuVally, a spokesman for Goldman Sachs, declined to comment.
Rakoff said his ruling on the three wiretaps without Gupta isn’t final. Before they’re played, prosecutors will have to establish that a conspiracy existed between Rajaratnam and Gupta, he said. Gupta’s lawyer, Gary Naftalis, had argued that calls without Gupta are hearsay and not admissible as evidence.
In one of the three calls, Rajaratnam tells Galleon trader Ian Horowitz on Sept. 24, 2008, that he’d directed a large trade of Goldman Sachs the day before. “I got a call at 3:58,” Rajaratnam said, “saying something good might happen to Goldman.”
Prosecutors say Gupta tipped Rajaratnam after participating by phone in a meeting of the Goldman Sachs board in which Goldman Sachs agreed to accept a $5 billion investment from Berkshire Hathaway Inc. (BRK/A)
After Gupta told Rajaratnam about the investment, the fund manager directed that Galleon purchase $27 million of Goldman Sachs stock, prosecutors said. Galleon made a $840,000 profit on the trade, prosecutors said.
Rakoff also made a preliminary ruling denying Gupta’s bid to exclude a July 29, 2008, call in which Gupta discloses to Rajaratnam details of a Goldman Sachs board meeting about the bank seeking to acquire a commercial bank or American International Group Inc. (AIG)
Rakoff said that he may reconsider his ruling on that phone recording as the trial proceeds.
Naftalis said that the information discussed on the July 29 call wasn’t confidential and that the recording should be excluded because it is “more prejudicial than probative.”
The case is U.S. v. Gupta, 11-cr-00907, U.S. District Court, Southern District of New York (Manhattan).
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