Rajat Gupta trial Day 1: A grey day with its funny moments

The start of the Rajat Gupta trial on Monday was accompanied by torrential rain pouring down in New York. Dressed in a dark suit, the former global head of McKinsey & Co., sat quietly in the courtroom as the long-anticipated legal drama unfolded around him.



"Common sense"
During the 12-member jury selection, Gupta appeared to be consulting with his lawyers about whom to choose. The jury includes a school teacher, a nurse, a beauty consultant and a non-profit executive. On the first day, both the prosecution and defence urged them to use their "common sense."  

Gupta has been accused by the US government of passing on confidential information about Goldman Sachs Group Inc. and Procter & Gamble Co. to Raj Rajaratnam, a billionaire hedge fund manager, whose phone was being tapped by the US Federal Bureau of Investigation. Rajaratnam is presently serving an 11-year-prison term for insider trading.

Assistant US Attorney Reed Brodsky described how Gupta phoned Rajaratnam, the co-founder of the Galleon hedge fund, with confidential information about Goldman Sachs while serving as a director. Brodsky argued that call records between the two men and the subsequent trades made by Rajaratnam were quite obviously connected. "Use your common sense," he urged.

The US government lawyers claim that after a Goldman Sachs board meeting on September 28 2008, Gupta immediately phoned Rajaratnam to tell him that the investment bank was going to receive $ 5 billion from Warren Buffet's company Berkshire Hathaway. This led to Rajaratnam buying Goldman Sachs shares just two minutes before the market closed that day, which yielded a more than $800,000 profit.

Brodsky continued that Gupta, an IIT-Delhi and Harvard Business School graduate, appeared "sophisticated and highly accomplished" but he also "threw away his duties" by disclosing corporate secrets when the investment bank was going through a rough time.

As Brodsky laid out the case against Gupta, the defendant, at one point, leaned forward and rubbed his eyes. Outside, the rain came down in sheets.

Gary Naftalis, Gupta's lawyer, mocked the prosecution's case as based completely on circumstantial evidence. He argued that it didn't make sense for Gupta, a reputed global business icon, to throw away a four decades of extraordinary work to cheat in a scheme that yielded no profits for him.

The prosecution intends to use wiretaps to prove their case. These conversations have Rajaratnam talking to two Galleon employees about tips received on Goldman Sachs. But they don't have Gupta's voice. "There is not a single wiretapped conversation with Mr. Gupta exchanging insider information," said Naftalis. "They couldn't come up with a single conversation."

Naftalis noted that the prosecution's case was based on, "speculation, guesswork and suspicion. "There really is no hard evidence," he said, also stressing that Rajaratnam had other sources as well.

The first government witnesses will be called on Tuesday.

Charitable works
As the lawyers battled it out, Gupta often leaned back in his chair and crossed his legs. He alternated this with taking short walks around the defence table and occasionally speaking with his family members who were also attending.

Naftalis and Judge Jed Rakoff also contested how much of Gupta's charitable works could be mentioned to the jury . Besides his business persona, Gupta was respected for his philanthropic work that included setting up the Indian School of Business in Hyderabad, raising $1 billion in relief funds after the earthquake in Gujarat in 2001 as well as his campaign against Malaria and AIDS.

Rakoff didn't see how these were relevant to the case. But Naftalis argued that Gupta's philanthropy countered the prosecution's position that he was driven by greed. Rakoff relented - a little. "I remain skeptical," he said, but allowed some leeway in an opening statement. "I will not allow you to say that he is world renowned leader."

Judge Red Rakoff explained that he was against the argument, "he is a good guy so you should not convict him."

The overall sombre trial was pricked by some funny moments. Surprisingly, most of them came from the judge. When discussing Gupta's charitable works, he told Naftalis not to mention "AIDS or malaria…or bubonic plague." Even Gupta smiled.