Gupta among imp people on Rajaratnam list: witness

New York: Indian-American former Goldman Sachs director Rajat Gupta was on a list of "important people" whose phone calls hedge fund founder Raj Rajaratnam took at any cost, even during the crucial trading hours, the first witness in the high-profile insider trading trial testified.

Gupta was, however, excluded from a trip the Sri Lankan billionaire took to an Atlantic city casino in early 2008 with other corporate big wigs.

Jurors in 63-year-old Gupta`s trial listened to these two different sides of the relationship between him and Rajaratnam at the second day of his hearing in US District Court, Southern District of New York.

The prosecutor tried to show to the jury the close relationship between Rajaratnam and Gupta, who even had an electronic security pass to Galleon`s Manhattan offices. The defence, on its part, presented an itinerary of the helicopter trip Rajaratnam took with a group of six other fund managers for a fantasy football celebration event to a casino in Atlantic City in February 2008 without inviting Gupta.

The defence, which is trying to prove that Gupta and Rajaratnam had differences in 2008, made its case that Gupta was excluded from the one-night helicopter trip from New York to Atlantic City in New Jersey.

On that trip, Rajaratnam had invited Goldman Sachs President Gary Cohn, then Goldman co-head of trading David Heller and hedge fund managers but not Gupta. It remained unclear whether Cohn actually went to the trip.

"It was their fantasy football celebration trip… the proceeds to go to charity," Rajaratnam`s former secretary Caryn Eisenberg said. Eisenberg, the prosecution`s first witness, said in court that she had been given strict instructions that he should not be disturbed during the first half-hour and the last half-hour of the trading day except when he got phone calls from five "important people", including Gupta.

However, there were occasions when Eisenberg said Rajaratnam told her to "lie" to Gupta that he was not in the office when the former McKinsey head called.

Eisenberg testified on cross examination that Rajaratnam would sometimes not meet Gupta and direct her to tell Gupta that he was not in his office even when he was present in his corner chambers. "Lying, as in saying he wasn`t in the office," she said, adding, "he may have snuck out of the building to avoid him."

Gupta`s lawyers showed jurors excerpts of a February 29, 2008, instant message exchange between Eisenberg and Anita Teglasi, another Rajaratnam assistant. "Raj made me lie to Rajat," Eisenberg wrote.
"He doesn`t want to see him."

Eisenberg testified that the list of five "important people" included former Intel Corp. managing director Rajiv Goel, partner at McKinsey Anil Kumar, Parag Saxena who runs the India-focussed private equity firm New Silk Route and Stanley Druckenmiller, who runs Duquesne Capital Management LLC. Gupta was identified on the documents as "a good friend — chairman and CEO of McKinsey & Co."

Eisenberg said just before the markets closed on September 23, 2008 she had transferred a call to Rajaratnam from "one of the men who frequently called" her boss. The person on the line, a male caller, had said: "it was urgent." The phone call was from a number used by Gupta`s assistant.

She said she had patched the call through to Rajaratnam as she recognised the voice as being of one of the people on the "list." She said she could not identify the caller by name.

Prosecutors have said Gupta had called Rajaratnam on that September 2008 day just seconds after a Goldman board meeting approved a USD 5 billion investment by Warren Buffett`s Berkshire Hathaway.

The public announcement of Buffet`s investment in Goldman was made after the markets closed on September 23. Galleon made a profit of one million dollars on its Goldman shares.

Eisenberg said Rajaratnam then called Galleon co-founder Gary Rosenbach into his office and heard Rosenbach repeatedly saying "Buy Goldman Sachs" on his phone.

The prosecution`s second witness Ananth Muniyappa, a former Galleon trader, said he and Rosenbach hurried to buy a total of 267,000 shares of Goldman Sachs at about USD 124 a share after Rajaratnam got the call in September 2008.

Muniyappa told the jury "that Raj was either still on the phone or just getting off the phone" when he instructed him to buy 100,000 Goldman Sachs shares.

Assistant US Attorney Reed Brodsky asked Eisenberg about Rajaratnam`s expression after the trade was completed. "He was smiling more," she testified, adding that she remembers the events of that day because everyone at Galleon was discussing it the next day.

"It was memorable because Warren Buffett is a very important and influential man, and he didn`t typically make investments in companies like Goldman Sachs."

On cross examination, Gupta`s defence lawyer David Frankel pointed out that Gupta was not the only person on the "important people" list who was associated with Goldman Sachs.

Goldman managing director David Loeb was also on the list. Loeb`s name was among the five additions later made to the original list. "He would call throughout the day, but not as frequently as some of the other callers," Eisenberg said of Loeb.

Eisenberg testified that she saw Gupta "many times" in Galleon`s Manhattan office during 2008 and 2009, with Gupta even having his own electronic security pass to the office on some occasions.

Gupta was considered a "good friend" of Rajaratnam`s. He has pleaded not guilty to passing insider information to Rajaratnam, who is currently serving an 11 year prison term. The trial, which began on May 21, is expected to last three weeks. Gupta`s wife, two of his four daughters and a few of his friends were present in court on day two of the trial.

Part of the strategy of Gupta`s defence lawyers is also that Rajaratnam had several other sources who could have given him secret information about companies. They contend that there is no "direct, real and hard evidence" against Gupta.