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The Verdict of U.S Federal Court
A former director at Goldman and Procter & Gamble Co., Mr. Rajat Gupta was
convicted on three counts of securities fraud and one count of conspiracy for
passing along confidential boardroom information about Goldman to a hedge
fund that earned millions of dollars trading on his tips. He was acquitted of two
counts of securities fraud, including the only one relating to P&G.

Mr. Rajat Gupta, who is also a former head of McKinsey & Co., faces up to 20
years in prison on each of the fraud charges and up to five years for the
conspiracy charge. But his sentence is likely to be significantly lower under
federal guidelines. Sentencing is set for Oct. 18.

The 12-member jury, sitting in a New York federal court just blocks from Wall
Street, handed up a quick verdict after a four-week trial. Janeat Brown, a 32-year-
old fourth-grade teacher who was juror No. 5, said that in the first few hours of
deliberations, 11 of 12 jurors believed Mr. Rajat Gupta was guilty.

By contrast, jurors deliberated 12 days last year before convicting hedge-fund
titan Raj Rajaratnam, who now is serving an 11-year prison term. Some jurors
shed tears after the verdict was read, as Mr. Rajat Gupta's daughters, who had sat
in the front row throughout the trial, sobbed and hugged one another.

"We wanted him to walk, go home to his family, live a very prosperous life," said
juror Ronnie Sesso, a 53-year-old youth advocate in New York. "I struggled with
everything…. But looking at the evidence made it clear."

An appeal is likely. "We continue to feel Mr. Gupta is innocent of all the
charges," said Gary Naftalis, his lawyer. "He didn't trade, he didn't tip Mr.
Rajaratnam. He didn't receive a dishonest dime."

Goldman said in a statement, "We are very disappointed that Mr. Gupta breached
his duties as a director and violated our shareholders' and the firm's trust."

On Thursday morning, only one juror wasn't convinced Mr. Gupta was guilty,
according to Ms. Brown, the teacher. This person had previous experience in
financial services and repeatedly drew upon it to make their case, according to
Ms. Brown.
"It was sort of frustrating to know that the evidence was there but personal
experience was being brought into it," she said.

The other jurors kept saying they needed to make a decision based on the
evidence, she said. The group then went around the room and examined the
evidence. After a full day of deliberations, the 12th juror was finally convinced of
Mr. Gupta's guilt.

Ms. Brown was a holdout herself on count No. 6, securities fraud related to the
purchase of 180,000 shares of Procter & Gamble. She said she believed Mr.
Gupta was guilty of tipping Mr. Rajaratnam about P&G. On Friday morning,
when she heard the others' arguments about why he was innocent, she says she
changed her mind and voted not guilty.

Mr. Gupta, who is free on bail until his October sentencing, is perhaps the most
prominent defendant ever convicted of insider trading. While arbitrager Ivan
Boesky was well-known at the time of his guilty plea in the 1980s, he wasn't as
deeply embedded in American corporations as Mr. Gupta, who advised many
high-profile chief executives. Junk-bond trader Michael Milken was indicted in
an insider-trading investigation but pleaded guilty to other charges. Martha
Stewart was also probed for insider trading but convicted of obstructing justice.

The verdict was a huge victory for prosecutors, and could embolden them to bring
more insider-trading cases without the use of wiretaps, lawyers say.

Much of the evidence against Mr. Gupta was circumstantial, including phone
records that showed he promptly called Mr. Rajaratnam after receiving
confidential information. The billionaire founder of hedge fund Galleon Group
then ordered his funds to trade on the inside information.

"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. "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."

Mr. Gupta—a figure out of central casting with a square jaw, silver hair and
distinguished bearing—sat erect with his hands clasped in his lap during the trial.
Friends said he wanted to testify in his own defense that he was innocent.
Call Transcripts and Audio
Call between Raj Rajaratnam and Rajat Gupta -- July 29, 2008
Call between Raj Rajaratnam and Danielle Chiesi -- Aug. 15, 2008
Call between Raj Rajaratnam and Anil Kumar -- Oct. 3, 2008
Call between Raj Rajaratnam and Galleon employees -- Sept. 24, 2008
Call between Raj Rajaratnam and Galleon trader Ian Horowitz -- Sept. 24, 2008
Call between Raj Rajaratnam and David Lau -- Oct. 24, 2008
"He just wants to get it out," Anil Sood, a friend from Mr. Gupta's childhood in
India who testified as a character witness, said in the closing days of the trial,
adding that Mr. Gupta was angry and frustrated over the prosecution.

Ultimately, Mr. Gupta took the advice of his lawyers, and the urging of his
family, and elected not to take the stand, believing his best chance at acquittal
was to raise doubts about the government's case, said Mr. Sood in an interview.

Any appeal would be likely based in part on an argument that the judge
improperly allowed the government to play certain wiretaps in which Mr.
Rajaratman bragged to associates about inside tips, Mr. Naftalis indicated. The
defense had objected to those tapes as hearsay.

Mr. Naftalis said Mr. Gupta plans to ask U.S. District Judge Jed Rakoff to set
aside the verdict and will appeal if he allows the verdict to stand.

A native of Kolkata, Mr. Gupta moved at a young age to New Delhi, where he
thrived despite the deaths of his mother, a teacher, and his father, a freedom
fighter against the British and journalist, when he was in his teens. Mr. Gupta
studied engineering at the Indian Institute of Technology and came to the U.S. in
1971 to attend Harvard Business School.

Two years later, he broke into McKinsey, a top-tier consulting firm for America's
most powerful corporations. In 1994, at age 45, he became the first non-
American-born leader of the firm, which then had $1.3 billion in annual revenue.
Later, Mr. Gupta helped his alma mater in India start the Indian School of
Business in Hyderabad, with donations he sought from corporate executives.

Players in the Gupta Trial
There was drama in the courtroom Friday. For a moment, after the jury foreman,
Richard Lepkowski, said Mr. Gupta wasn't guilty on the first count, some in
attendance thought he might be acquitted of all the charges. But after Mr. Gupta
was found guilty on the second count, his daughters broke down in sobs in the
front row behind him, collapsing on one another. Mr. Gupta's wife, Anita, leaned
back, staring at the ceiling, then leaned forward, burying her face in her arms.

Mr. Gupta, sporting a dark suit and a red spotted tie, showed no reaction. He
pushed slowly through a throng of reporters outside the courthouse, his back
arched straight, and into a waiting car with his family. Mr. Gupta didn't speak.

Prosecutions of insider trading based on circumstantial evidence once were
common, but since 2009 federal authorities in New York have strengthened their
hand by using wiretapped phone calls to obtain 62 convictions and guilty pleas
out of 68 people charged.

Mr. Gupta's defense team, besides pointing out the lack of such direct evidence
against him, sought to persuade jurors that he had a falling out over $10 million
that he had lost in an investment with Mr. Rajaratnam, negating any motive he
would have had to provide the tips.

Mr. Lepkowski described Mr. Gupta as "the American dream." But he said jurors
were influenced by wiretaps of Mr. Rajaratnam bragging to associates that he'd
received tips about Goldman, and by a recording on July 29, 2008, of Mr. Gupta
speaking with Mr. Rajaratnam about what had happened at a Goldman board
meeting.

Defense lawyers tried in vain to keep the tape out of the trial because they said
the information was already public and Mr. Rajaratnam never traded on it.
Prosecutors said it showed the relationship between the two.

Rajat Gupta leaves federal court in New York following the guilty verdict on
Friday. He is free on bail.
The four-week trial had as its backdrop the financial crisis that exploded in the
fall of 2008, when Mr. Gupta was accused of giving Mr. Rajaratnam inside
information on two issues crucial to Goldman's financial health: a $5 billion
investment by Warren Buffett's Berkshire Hathaway Inc.BRKB -0.30% and the
bank's first quarterly loss as a public company.

Prosecutors said Mr. Gupta, who invested with Mr. Rajaratnam at Galleon in
various ventures, tipped him off because of their friendship and business interests.
Their relationship was so close, prosecutors said, that Mr. Gupta had open access
with his own keycard to Galleon's Midtown Manhattan office.

The defense countered that there was no evidence Mr. Gupta profited, or traded
on, any alleged tip.

Prosecutors were able to piece together a pattern of telephone and trading records,
supported by the testimony of witnesses, including Goldman Sachs Chief
Executive Lloyd Blankfein. Prosecutors accused Mr. Gupta of phoning Mr.
Rajaratnam time and time again immediately after learning of big developments
at the companies in which he served as a director.

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Verdict rajat gupta case

  • 1. The Verdict of U.S Federal Court A former director at Goldman and Procter & Gamble Co., Mr. Rajat Gupta was convicted on three counts of securities fraud and one count of conspiracy for passing along confidential boardroom information about Goldman to a hedge fund that earned millions of dollars trading on his tips. He was acquitted of two counts of securities fraud, including the only one relating to P&G. Mr. Rajat Gupta, who is also a former head of McKinsey & Co., faces up to 20 years in prison on each of the fraud charges and up to five years for the conspiracy charge. But his sentence is likely to be significantly lower under federal guidelines. Sentencing is set for Oct. 18. The 12-member jury, sitting in a New York federal court just blocks from Wall Street, handed up a quick verdict after a four-week trial. Janeat Brown, a 32-year- old fourth-grade teacher who was juror No. 5, said that in the first few hours of deliberations, 11 of 12 jurors believed Mr. Rajat Gupta was guilty. By contrast, jurors deliberated 12 days last year before convicting hedge-fund titan Raj Rajaratnam, who now is serving an 11-year prison term. Some jurors shed tears after the verdict was read, as Mr. Rajat Gupta's daughters, who had sat in the front row throughout the trial, sobbed and hugged one another. "We wanted him to walk, go home to his family, live a very prosperous life," said juror Ronnie Sesso, a 53-year-old youth advocate in New York. "I struggled with everything…. But looking at the evidence made it clear." An appeal is likely. "We continue to feel Mr. Gupta is innocent of all the charges," said Gary Naftalis, his lawyer. "He didn't trade, he didn't tip Mr. Rajaratnam. He didn't receive a dishonest dime." Goldman said in a statement, "We are very disappointed that Mr. Gupta breached his duties as a director and violated our shareholders' and the firm's trust." On Thursday morning, only one juror wasn't convinced Mr. Gupta was guilty, according to Ms. Brown, the teacher. This person had previous experience in financial services and repeatedly drew upon it to make their case, according to Ms. Brown.
  • 2. "It was sort of frustrating to know that the evidence was there but personal experience was being brought into it," she said. The other jurors kept saying they needed to make a decision based on the evidence, she said. The group then went around the room and examined the evidence. After a full day of deliberations, the 12th juror was finally convinced of Mr. Gupta's guilt. Ms. Brown was a holdout herself on count No. 6, securities fraud related to the purchase of 180,000 shares of Procter & Gamble. She said she believed Mr. Gupta was guilty of tipping Mr. Rajaratnam about P&G. On Friday morning, when she heard the others' arguments about why he was innocent, she says she changed her mind and voted not guilty. Mr. Gupta, who is free on bail until his October sentencing, is perhaps the most prominent defendant ever convicted of insider trading. While arbitrager Ivan Boesky was well-known at the time of his guilty plea in the 1980s, he wasn't as deeply embedded in American corporations as Mr. Gupta, who advised many high-profile chief executives. Junk-bond trader Michael Milken was indicted in an insider-trading investigation but pleaded guilty to other charges. Martha Stewart was also probed for insider trading but convicted of obstructing justice. The verdict was a huge victory for prosecutors, and could embolden them to bring more insider-trading cases without the use of wiretaps, lawyers say. Much of the evidence against Mr. Gupta was circumstantial, including phone records that showed he promptly called Mr. Rajaratnam after receiving confidential information. The billionaire founder of hedge fund Galleon Group then ordered his funds to trade on the inside information. "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. "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." Mr. Gupta—a figure out of central casting with a square jaw, silver hair and distinguished bearing—sat erect with his hands clasped in his lap during the trial. Friends said he wanted to testify in his own defense that he was innocent.
  • 3. Call Transcripts and Audio Call between Raj Rajaratnam and Rajat Gupta -- July 29, 2008 Call between Raj Rajaratnam and Danielle Chiesi -- Aug. 15, 2008 Call between Raj Rajaratnam and Anil Kumar -- Oct. 3, 2008 Call between Raj Rajaratnam and Galleon employees -- Sept. 24, 2008 Call between Raj Rajaratnam and Galleon trader Ian Horowitz -- Sept. 24, 2008 Call between Raj Rajaratnam and David Lau -- Oct. 24, 2008 "He just wants to get it out," Anil Sood, a friend from Mr. Gupta's childhood in India who testified as a character witness, said in the closing days of the trial, adding that Mr. Gupta was angry and frustrated over the prosecution. Ultimately, Mr. Gupta took the advice of his lawyers, and the urging of his family, and elected not to take the stand, believing his best chance at acquittal was to raise doubts about the government's case, said Mr. Sood in an interview. Any appeal would be likely based in part on an argument that the judge improperly allowed the government to play certain wiretaps in which Mr. Rajaratman bragged to associates about inside tips, Mr. Naftalis indicated. The defense had objected to those tapes as hearsay. Mr. Naftalis said Mr. Gupta plans to ask U.S. District Judge Jed Rakoff to set aside the verdict and will appeal if he allows the verdict to stand. A native of Kolkata, Mr. Gupta moved at a young age to New Delhi, where he thrived despite the deaths of his mother, a teacher, and his father, a freedom fighter against the British and journalist, when he was in his teens. Mr. Gupta studied engineering at the Indian Institute of Technology and came to the U.S. in 1971 to attend Harvard Business School. Two years later, he broke into McKinsey, a top-tier consulting firm for America's most powerful corporations. In 1994, at age 45, he became the first non- American-born leader of the firm, which then had $1.3 billion in annual revenue. Later, Mr. Gupta helped his alma mater in India start the Indian School of Business in Hyderabad, with donations he sought from corporate executives. Players in the Gupta Trial
  • 4. There was drama in the courtroom Friday. For a moment, after the jury foreman, Richard Lepkowski, said Mr. Gupta wasn't guilty on the first count, some in attendance thought he might be acquitted of all the charges. But after Mr. Gupta was found guilty on the second count, his daughters broke down in sobs in the front row behind him, collapsing on one another. Mr. Gupta's wife, Anita, leaned back, staring at the ceiling, then leaned forward, burying her face in her arms. Mr. Gupta, sporting a dark suit and a red spotted tie, showed no reaction. He pushed slowly through a throng of reporters outside the courthouse, his back arched straight, and into a waiting car with his family. Mr. Gupta didn't speak. Prosecutions of insider trading based on circumstantial evidence once were common, but since 2009 federal authorities in New York have strengthened their hand by using wiretapped phone calls to obtain 62 convictions and guilty pleas out of 68 people charged. Mr. Gupta's defense team, besides pointing out the lack of such direct evidence against him, sought to persuade jurors that he had a falling out over $10 million that he had lost in an investment with Mr. Rajaratnam, negating any motive he would have had to provide the tips. Mr. Lepkowski described Mr. Gupta as "the American dream." But he said jurors were influenced by wiretaps of Mr. Rajaratnam bragging to associates that he'd received tips about Goldman, and by a recording on July 29, 2008, of Mr. Gupta speaking with Mr. Rajaratnam about what had happened at a Goldman board meeting. Defense lawyers tried in vain to keep the tape out of the trial because they said the information was already public and Mr. Rajaratnam never traded on it. Prosecutors said it showed the relationship between the two. Rajat Gupta leaves federal court in New York following the guilty verdict on Friday. He is free on bail. The four-week trial had as its backdrop the financial crisis that exploded in the fall of 2008, when Mr. Gupta was accused of giving Mr. Rajaratnam inside information on two issues crucial to Goldman's financial health: a $5 billion
  • 5. investment by Warren Buffett's Berkshire Hathaway Inc.BRKB -0.30% and the bank's first quarterly loss as a public company. Prosecutors said Mr. Gupta, who invested with Mr. Rajaratnam at Galleon in various ventures, tipped him off because of their friendship and business interests. Their relationship was so close, prosecutors said, that Mr. Gupta had open access with his own keycard to Galleon's Midtown Manhattan office. The defense countered that there was no evidence Mr. Gupta profited, or traded on, any alleged tip. Prosecutors were able to piece together a pattern of telephone and trading records, supported by the testimony of witnesses, including Goldman Sachs Chief Executive Lloyd Blankfein. Prosecutors accused Mr. Gupta of phoning Mr. Rajaratnam time and time again immediately after learning of big developments at the companies in which he served as a director.