Gary Naftalis turned away from the witness stand last Thursday, mumbled “Got him” and gave a thumbs-up to his colleague at the defence team table.
The renowned lawyer allowed himself that briefest of indiscretions in a high-pressure case that is being followed all over the corporate world.
Naftalis is representing Rajat Gupta, who is being tried in a New York court for allegedly passing inside tips to Raj Rajaratnam, who was sentenced last year to 11 years in jail.
The trial enters final week on Monday with prosecution slated to produce Goldman Sachs’ Lloyd Blankfein as a witness, and defence presenting its own witnesses, among them Gupta’s daughter and a friend.
In the trial starting May 22, the prosecution has tried to prove Gupta as a member of the Goldman Sachs and P&G board tipped Rajaratnam to deals concerning those two firms.
Within 16 seconds of wrapping up a telephonic conference of the Goldman Sachs board on September 23, 2008 to approve a $5-billion investment in Warren Buffett, Gupta called up Rajaratnam to tell him about it.
Just two minutes before the close of the market, Rajaratnam ordered the purchase of about 217,200 shares of Goldman Sachs common stock for about $27 million.
Goldman Sachs announced the Buffet investment later that day on September 23. Its stocks opened for trading next morning $3 higher. Rajaratnam’s Galleon investment company offloaded all the 217,000 shares, netting a profit of $840,000.
In the second instance of insider trading, Gupta on October 23, 2008 allegedly called Rajaratnam 23 seconds after receiving information about Goldman Sachs’ negative quarterly earnings, which helped Galleon save several million dollars.
As a P&G director, Gupta allegedly called Rajaratnam to give advance information about negative earnings on January 29, 2000 also after a telephonic conference of the company’s board.
The US Securities and Exchange Commission said Gupta’s tips were worth $23 million to Galleon in profits or losses saved. There is no evidence, however, of Gupta profiting from these tips.
On Thursday, Naftalis allowed himself that brief celebration after questioning Michael Cardillo, an executive of Galleon.
Cardillo had claimed being told by RK Rajaratnam, the Galleon owner’s brother, that Rajaratnam had talked about having a “guy on the P&G board.”
Naftalis attacked Cardillo’s credibility as a state-tutored witness, who has done a deal that might win him a lighter sentence for cooperating with the prosecution.
The defence team has also tried to show Gupta was not close to Rajaratnam as alleged.