Wall Street insider trading: Phone call that proved Rajat Gupta’s undoing

CHARGES AGAINST RAJAT GUPTA

As a Goldman Sachs director, he passed on company secrets to his hedge fund manager friend Raj Rajaratnam, who played the markets using this information and made huge profits. Secret recordings of phone conversations between the two nailed Gupta. Gupta was so brazen about sharing Goldman secrets it sounded like “he was talking about what happened at a Yankee game yesterday,” the prosecution said.

GUPTA’S FAILED DEFENCE

Defence attorney Gary Naftalis claimed the FBI evidence created the illusion that legitimate business dealings were sinister. “That’s a gambit that can bamboozle people into thinking something was proven when it wasn’t ,” Naftalis said.

OTHER EVIDENCE

1

A July 2008 wiretap where Rajaratnam grills Gupta on whether the Goldman board had discussed acquiring a struggling bank, like Wachovia, or an insurance company.

2

“Have you heard anything along that line?” Rajaratnam asks Rajat Gupta. “Yeah,” Gupta responds. “This was a big discussion at the board meet.”

3

In a 2008 chat, Rajaratnam tells a trader he got a tip “from someone on the board of Goldman Sachs.”

PHONE CALL THAT PROVED GUPTA’S UNDOING

1

Govt highlighted a Sept 23, 2008 call from Gupta to Rajaratnam minutes after Gupta learned about how Warren Buffett’s Berkshire Hathaway planned to invest $5 billion in Goldman — a deal that wouldn’t be announced until stock market closed at 4pm.

2

Moments after the call ended at 3.55pm, Rajaratnam bought $40mn in Goldman stock — a last-minute trade that earned him nearly $1 mn.

3

Rajaratnam’s assistant, Caryn Eisenberg, testified it was the only call her boss got on his private line that day between 3pm & 4pm.