NEW YORK -- Jurors in a Manhattan federal court Friday found former Goldman Sachs board member Rajat Gupta guilty of conspiracy and securities fraud, only two days after closing arguments ended in the closely watched insider trading case.
Gupta, 63, was found guilty of passing on nonpublic information from Goldman Sachs board meetings to now-jailed hedge fund manager Raj Rajaratnam, but the jury didn't convict him on two charges, including an allegation that Gupta had also leaked information about discussions of the Procter & Gamble board, on which he also served.
"Having fallen from respected insider to convicted inside trader, Mr. Gupta has now exchanged the lofty board room for the prospect of a lowly jail cell," said Preet Bharara, the U.S. attorney in Manhattan, according to The Wall Street Journal "Violating clear and sacrosanct duties of confidentiality, Mr. Gupta illegally provided a virtual open line into the board room for his benefactor and business partner, Raj Rajaratnam."
Gupta’s four daughters cried and took turns embracing their father after the verdict was read, as Gupta maintained the relatively stoic face he had displayed throughout most of the four-week trial. His wife Anita buried her face in her arms, according to the Journal.
The conviction represents a tragic fall for Gupta, a Harvard graduate and corporate titan who was a former chief of McKinsey & Co., a top corporate consulting firm.
Sentencing in the case is scheduled for Oct. 18. Gupta faces up to 20 years in prison, according to the Journal, which says his sentence will likely be lower. Rajaratnam was sentenced in October to 11 years in prison for insider trading.
In a statement to the press after the trial, Gupta’s lead defense lawyer, Gary Naftalis said that the defense will move to set aside Friday’s verdict. “This is only round one,” he said.
Naftalis emphasized Gupta's innocence. He “didn’t trade, didn’t tip Mr. Rajaratnam. He didn’t receive a dishonest dime,” Naftalis told reporters.
Jurors didn't see it that way. “We wanted to believe the allegations weren’t true,” said jury foreman Rick Lepkowski in a question-and-answer session after the verdict. “At the end of the day, the evidence was, in my opinion, overwhelming.”
The matter was handed to the jury for deliberation on Wednesday, after a month of testimony and arguments. Last week, Goldman Sachs CEO Lloyd Blankfein completed his testimony for the prosecution, telling the court that Gupta was present at key Goldman board meetings in which nonpublic information was discussed.
Jurors seemed to have an appreciation for Blankfein, who has been making an effort lately to reach out to the press. In the courtroom, Blankfein exchanged banter with federal Judge Jed S. Rakoff, for example, joking about a high-priced restaurant Blankfein planned to visit with his daughter.
“I appreciated Mr. Blankfein’s levity,” during the frequent occasions when his testimony was interrupted by objections or requests for sidebar conferences with the judge, said Lepkowski, a nonprofit executive who lives in Ossining, N.Y. “I didn’t find him an unhelpful or uncredible witness.”
Throughout the trial, Gupta’s defense lawyers argued that the prosecution’s case was based on indirect, circumstantial evidence since there was no documentation of most of the conversations between Gupta and billionaire Rajaratnam.
One particularly crucial piece of evidence related to a Sept. 23, 2008, Goldman Sachs board conference call during the financial crisis in which a proposed $5 billion investment from Warren Buffett’s firm Berkshire Hathaway was discussed. Shortly after that call, the prosecution showed the court evidence that Gupta phoned Rajaratnam, though the substance of that call was not documented.
"That news was going to be very good news for Goldman Sachs," prosecutor Richard Tarlowe said in closing arguments. "It was getting the Good Housekeeping seal of approval ... When the board approved the deal that day, the public did not yet know something good was going to happen."
Shortly after the call between Gupta and Rajaratnam, the prosecution said, Rajaratnam directed employees at his hedge fund, Galleon Management, to purchase $40 million in Goldman Sachs stock.
As the AP reported, "the hedge fund manager's assistant, Caryn Eisenberg, testified at trial that it was the only call her boss received on his private line that day between 3 p.m. and 4 p.m. 'That evidence is devastating for the defendant ... If you believe Ms. Eisenberg, it's over – the defendant is guilty,' Tarlowe said."
In the end, Tarlowe's assessment prevailed. These sorts of calls were “too coincidental,” said juror Ronnie Sesso, a resident of Manhattan’s East Village neighborhood who works as a children’s advocate at the New York Administration for Children’s Services.
Asked whether Gupta’s status as a highly paid corporate executive colored their impression of him, both Sesso and Lepkowski said no, that they in fact found Gupta to be sympathetic. “I really feel [Gupta] was highly respected … He built a name for himself. He wanted the best for his family,” said Sesso.
Lepkowski agreed. “We wanted [Gupta] to walk out of that courtroom.”
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