Gupta’s Lawyer Seeks Victory Where Rajaratnam’s Failed

Attorney Gary Naftalis
Rajat Gupta, former Goldman Sachs Inc. director and former senior partner at McKinsey & Co., is photographed as he leaves federal court with his attorney Gary Naftalis in New York on Jan. 5, 2012. Photographer: Scott Eells/Bloomberg

Galleon Group LLC co-founder Raj Rajaratnam, for his trial last year on insider-trading charges, selected as his lawyer a combative ex-Marine who cursed at a cameraman after court one day.

The jury, citing overwhelming evidence, voted to convict.

Rajat Gupta -- the ex-Goldman Sachs Group Inc. director whose own insider-trading trial begins May 21 -- chose a lawyer with a different style: Gary Naftalis, an affable presence in the elite New York white-collar defense bar who recently attended a reception for a Rajaratnam prosecutor at his new law firm and who socializes with the judge presiding over the Gupta trial.

“Why is he so good? Because he’s very disarming,” said Charles Carberry, a friend and a former federal prosecutor. “Gary has a way of talking to people that’s non-confrontational,” said Carberry, now a partner at Jones Day in New York. “There’s nothing about him that reeks of arrogance.”

A jury in Manhattan will determine whether the 70-year-old Naftalis’s low-key style wins Gupta the acquittal that eluded Rajaratnam, who’s serving 11 years in prison. Of almost 90 criminal trials last year in the federal district that includes Manhattan, the Bronx and some suburban counties, all but about eight ended in conviction, according to the office of U.S. Attorney Preet Bharara, who’s prosecuting the case.

No Acquittals

Four of those convictions last year were in insider-trading cases, including Rajaratnam’s. Sixty-six people have been charged since August 2009 in the U.S. crackdown on illegal tipping, and 59 have pleaded guilty or been convicted at a trial. No one has won a not-guilty verdict. Some cases are pending.

“It has been increasingly difficult to get acquittals in white-collar cases,” Theodore Wells, co-chairman of the litigation department at Paul, Weiss, Rifkind, Wharton & Garrison LLP, told a gathering of defense lawyers on May 14. “There’s more of an anti-corporate attitude” among jurors, said Wells, who isn’t involved in Gupta’s case.

Gupta, who ran consulting firm McKinsey & Co. from 1994 to 2003 and also sat on the Procter & Gamble Co. board, is charged with conspiracy and securities fraud. Prosecutors say he gave Rajaratnam material, nonpublic information about New York-based Goldman Sachs and Cincinnati-based P&G, the world’s largest consumer-products company. Securities fraud carries a maximum 20-year prison sentence.

‘Illicit Profits’’

Tips included details of Goldman Sachs’s earnings in the first quarter of 2007 and fourth quarter of 2008, as well as the $5 billion investment in the bank by Warren Buffett’s Berkshire Hathaway Inc. in September 2008, prosecutors said. The leaks generated “illicit profits and loss avoidance” of more than $23 million for Galleon, the Securities and Exchange Commission said in a related lawsuit.

Gupta’s trial won’t be like Rajaratnam’s, which was built on dozens of wiretapped phone calls in which the hedge fund co-founder could be heard swapping tips. Former colleagues also testified for the prosecution.

The Gupta jury will hear a circumstantial case, centered on the timing of trades after conversations between the two men, plus a smaller number of wiretapped phone calls. Prosecutors say Rajaratnam can be heard on the tapes referring to Gupta without naming him.

“We think the government has a lousy case,” Naftalis told U.S. District Judge Jed Rakoff in court April 16 in a failed bid to exclude the wiretaps. In court papers, he has called the indictment “a case without any direct evidence” and said other Goldman Sachs employees may have tipped Rajaratnam.

Big Names

Naftalis, who is co-chairman of New York-based Kramer Levin Naftalis & Frankel LLP, comes to Gupta’s defense after representing some of the biggest names on Wall Street.

His clients have included Michael Eisner, the former Walt Disney Co. CEO whom Naftalis successfully defended at a 2005 civil trial over claims that he breached his duty to shareholders, and ex-Refco Inc. Chief Executive Officer Phillip Bennett, who is serving 16 years in prison after pleading guilty in a $2.4 billion securities fraud.

In the early 1990s, Naftalis persuaded prosecutors not to file criminal charges against Salomon Brothers in a bond-trading scandal. He’s now defending Muriel Siebert, the founder of Siebert Financial Corp., against civil claims of wrongful termination by an ex-employee.

“He’s shown a knowledge of the Street, and he’s very smart,” Siebert, the first woman to own a seat on the New York Stock Exchange, said in an interview. “In our case, he knew the discount business, what duties were involved. But I think he has a general knowledge -- he’s not a fast-talking person.”

Not New

Nor is he new to insider-trading cases. In the mid-1980s, Naftalis represented Robert Wilkis, a Lazard Freres & Co. banker who came under scrutiny for illegal trades and for tipping Dennis Levine, a managing director at Drexel Burnham Lambert Inc., about a takeover. After agreeing to plead guilty and cooperate with prosecutors, Levine taped a call with Wilkis, who pleaded guilty.

“He made his assessment that his client had no defense,” Carberry, who was the prosecutor, said in an interview. Wilkis didn’t return a call seeking comment on the case.

In 1987, Naftalis helped persuade prosecutors not to charge his client Kidder Peabody & Co., which had been acquired by General Electric Co. and would have been devastated by an indictment, Carberry said. The brokerage faced potential liability for the illegal trades of an employee, Martin Siegel, who also pleaded guilty and who was represented by Naftalis’s friend Rakoff.

New Jersey Native

A native of Newark, New Jersey, Naftalis graduated from Rutgers University and pursued a master’s degree in history at Brown University before enrolling at New York’s Columbia Law School, where he earned a degree in 1967. He went to work for the U.S. attorney in Manhattan, where Rakoff was among his colleagues.

The two have remained friends. In 2009, the judge officiated at the wedding of one of Naftalis’s sons, and in court the two sometimes trade friendly banter.

Naftalis has one son who is a Manhattan federal prosecutor and a second about to be sworn in. Last week, when Naftalis asked for a delay in proceedings on May 22 to attend the ceremony, Rakoff suggested that he, Naftalis and the Gupta prosecutor, Assistant U.S. Attorney Reed Brodsky, all go together. Naftalis agreed.

Naftalis, who declined to comment for this article, tells his clients he’s a hands-on litigator who will make all decisions except one: whether to testify. A skier and fan of the New York Mets baseball team and the New York Knicks basketball team, he revels in the competition of a trial.

‘Candy Store’

“I’m sort of like a kid in a candy store,” he said in a January interview with, a website for lawyers. “I like it all, but I really like giving opening statements.”

Gregory Williams, a lawyer at Richards Layton & Finger PA in Wilmington, Delaware, watched Naftalis dissect rival claims in the trial over whether Eisner and Walt Disney’s directors violated their fiduciary duty by paying ex-President Michael Ovitz $140 million in severance.

“He disarms you with kindness, but he is extremely effective,” said Williams, who represented Disney directors at the trial. “He has an unassuming, laid-back style that is extremely effective.”

Style alone didn’t win the Disney case, Williams said. Naftalis was also well-prepared and agile in the courtroom, he said. Carberry said two of Naftalis’s longtime partners, Alan Friedman and David Frankel, are also nimble litigators. Frankel is joining in Gupta’s defense.

‘Good Reception’

“Credibility is the key to being a lawyer,” Naftalis told “If you make representations that turn out not to be accurate, or if you take positions that are over the top or not supported by the facts, you will not get a good reception.”

Naftalis will push back when he must. At a May 16 hearing in the Gupta case, he raised his voice and paced, calling a prosecution argument “demonstrably incorrect.” And an avuncular manner can mask his guile, as when he offhandedly mentioned at the close of an April 20 hearing that the U.S. was probing another Goldman Sachs employee for insider trading.

“He wins over jurors by his sensible approach,” said Robert Morgenthau, who hired Naftalis as a federal prosecutor when he was Manhattan U.S. attorney. Juries “instinctively” trust him, said Morgenthau, who after nine years heading the U.S. attorney’s office served for 35 years as Manhattan district attorney.

Style Matters

Style matters, said Tom Dewey, a lawyer at New York’s Dewey Pegno & Kramarsky LLP, who isn’t involved in the Gupta case.

John Dowd, Rajaratnam’s ex-Marine lawyer, brought a “no-holds-barred, confrontational, fight-for-every-inch approach” to combat multiple witnesses and wiretaps, Dewey said in an interview. He sparred with witnesses at the Rajaratnam trial and occasionally snapped at a prosecutor.

In Gupta’s case, where the evidence may be less concrete, “a more low-key approach may well be warranted,” Dewey said.

Dowd declined to comment for this story, said Ben Harris, a spokesman at his law firm, Akin Gump Strauss Hauer & Feld.

“In most criminal cases, the defendant does not testify, so for that reason alone the style and presentation of the defendant’s lawyer are enormously significant to a jury,” Dewey said. “Gary is just as tough, but in a much more understated, buttoned-down fashion.”

The case is U.S. v. Gupta, 11-cr-907, U.S. District Court, Southern District of New York (Manhattan).

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