Gupta, who sat on the boards of Procter & Gamble and Goldman Sachs, is accused of divulging confidential details to his friend Raj Rajaratnam
Rajat Gupta, former director of Goldman Sachs is likely to face "expanded charges" of insider trading even as his lawyers claimed that the US government allegations were merely "mumbo jumbo".
During a pretrial hearing in Federal District Court in Manhattan yesterday, the government said it is likely to bring slightly revised and expanded charges in a superseding indictment against Gupta by the end of January.
"A final decision has not been made, but more likely than not there will be a superseding indictment," Assistant US Attorney Richard Tarlowe told the judge during the hearing that lasted for over an hour and which Gupta attended.
Gupta, 63, who sat on the boards of Procter & Gamble and Goldman Sachs, is accused of divulging confidential details about those companies to his friend Raj Rajaratnam, the convicted former hedge fund manager now serving an 11-year jail term.
In the indictment filed last year, the government had said Gupta "provided inside information to Rajaratnam because of his friendship and business relationships with Rajaratnam. "Gupta benefited and hoped to benefit from his friendship and business relationships with Rajaratnam in various ways, some of which were financial".
Calling the government's allegation in the indictment as "mumbo jumbo", Gupta's lawyer Gary Naftalis said his client had not made any profits through his dealings with Rajaratnam. "We would like to know what allegations there are other than the vague mumbo jumbo here (in the indictment). What's their theory?" Naftalis asked. "What were the financial benefits?... It's a simple question. Our client didn't trade, there was no profit-sharing agreement, there was no kick-back," he said.
Gupta is fighting charges of securities fraud and conspiracy and preparing for an April 9 trial. He faces a maximum prison sentence of up to 105 years if convicted. Dressed in a dark blue suit, Gupta remained sombre throughout the hearing, exchanging only a few words with his legal team. While coming out of the court after the hearing, he politely declined to make any comments to reporters. Naftalis too did not make any comments.
Prosecutors have alleged that Rajaratnam made millions of dollars in profits and avoided massive losses through the inside information Gupta passed on to him which the Indian-American learnt in his capacity as board member of Goldman Sachs and Proctor and Gamble. Earlier this week, Gupta's lawyers filed legal papers seeking to dismiss certain counts against their client, suppress the use of wiretap evidence and force the government to clarify its indictment. During the hearing, Naftalis, pressed the government to clarify language in its indictment that suggested his client had leaked information about companies other than Procter and Goldman to Rajaratnam, the former head of the Galleon Group.
Tarlowe said the other company was J.M. Smucker, which is known for its jellies and jams. In June 2008, Smucker said it was acquiring Folgers Coffee from Procter & Gamble for about USD 3 billion. The government said previously in its indictment that the day before this announcement, Rajaratnam told a colleague that he had learned from a director of Procter & Gamble that Smucker was buying Folgers. On the wiretap issue, Judge Rakoff indicated that chances were slim that he would bar the government from playing secretly recorded phone conversations at Gupta's trial. His lawyers are arguing that the law does not permit federal authorities to use wiretaps in insider trading cases.
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