NY inside-trading trial can feature disputed call

AP News
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Posted: May 16, 2012 3:27 PM
NY inside-trading trial can feature disputed call

A New York judge says prosecutors at an insider trading trial can play for jurors the only recording of a phone conversation between a former Goldman Sachs board member and a hedge fund founder.

Federal Judge Jed Rakoff in Manhattan made an earlier tentative ruling permanent Wednesday afternoon at a final conference before the trial of Rajat Gupta starts Monday.

Gupta was a board member at Goldman Sachs and Procter & Gamble before he was accused of giving tips in 2008 to a billionaire hedge-fund trading friend. His lawyer says he gave no inside information and expects to be exonerated at trial.

The judge left room to later limit how each side uses the 24-minute phone recording from July 2008 as they make their arguments to jurors.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

A judge said Wednesday he expects to let prosecutors play for jurors at trial next week the only recording of a phone call between a former Goldman Sachs board member accused of insider trading and a hedge fund founder.

U.S. District Judge Jed Rakoff made the tentative ruling at a hearing before the trial of Rajat Gupta begins with jury selection Monday. Gupta was a board member at Goldman Sachs and Procter & Gamble when the government said he gave tips in 2008 to billionaire hedge-fund trading friend, Raj Rajaratnam. Gupta's lawyers say he did not.

Prosecutors plan to play a 24-minute recording of a July 2008 conversation in which Gupta discussed Goldman Sachs' plans with Rajaratnam, who founded the Galleon Group of hedge funds. Defense lawyers argued that the information was already public. It is the only recording between the men that relates to the charges.

The taped conversation carries added significance because prosecutors have relied on wiretaps in their prosecution of Rajaratnam and more than two dozen others in a wide ranging probe of insider trading in the hedge fund industry. U.S. Attorney Preet Bharara has said it was the most extensive use of wiretaps ever in an insider trading investigation.

After he was convicted at trial, Rajaratnam began serving an 11-year prison sentence, the longest ever given in an insider trading case. Others charged in the probe, including workers at public companies who shared tips with money managers, have pleaded guilty or been convicted at trial.

Gupta, 63, of Westport, Conn., has pleaded not guilty to one count of conspiracy to commit securities fraud and five counts of securities fraud, charges that carry a potential penalty of 105 years in prison. He remains free on $10 million bail.

At Wednesday's hearing, Assistant U.S. Attorney Reed Brodsky promised that in its arguments to jurors, "you won't hear the government use the word `greed.'"

He was responding to arguments by Gupta's lawyer, Gary Naftalis, who said it was necessary to tell the jury about his client's impressive charitable work to counter the government's depiction of him as being obsessed with money.

"He's done all these wonderful things. And they would say that one day out of a clear blue sky in the seventh decade of his life, he decides to become a criminal," Naftalis said.

He said he believed the government was prepared to show jurors "a false and misleading picture" of a man who devoted at least half of his time to charitable causes.

The judge said a quick reference to charitable works could be mentioned if Gupta testifies. Naftalis refused to divulge whether he will.