A US judge has asked prosecutors to provide specific financial benefits they allege that the former Goldman Sachs director, Mr Rajat Gupta, made by passing inside information to his friend, Mr Raj Rajaratnam, amid allegations that he also tipped him about Procter and Gamble’s 2008 sale of Folgers Coffee Co to JM Smucker.
The judge’s direction came after Mr Gupta’s lawyers claimed he made no profits and called the government’s allegations “mumbo jumbo’’.
In a pre-trial hearing in Manhattan federal court here yesterday, Judge Mr Jed Rakoff said he would “encourage” the government to be “more specific” about the financial benefits accrued to Mr Gupta, as alleged in the indictment filed against him in October last year.
Mr Rakoff said the prosecutors should “spell them (any financial profits) out with reasonable specificity” in any superseding indictment the government may bring against Mr Gupta in the coming weeks.
During the hearing that lasted for over an hour and which Mr Gupta attended, the government said it is likely to bring slightly revised and expanded charges in a superseding indictment against Mr 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, Mr Richard Tarlowe, told the judge.
Prosecutors also disclosed during the hearing that apart from passing confidential information about Goldman Sachs and Procter and Gamble to Mr Rajaratnam, Mr Gupta tipped the Galleon hedge fund founder about P&G’s three billion dollar sale of Folgers Coffee Co to JM Smucker in 2008.
The defence wanted to strike out from the indictment the mention of “other company” apart from Goldman Sachs and P&G about which Mr Gupta had passed on information to Mr Rajaratnam.
The prosecutor said there was one other company.
“Gupta disclosed the information about a P&G sale of Folgers Coffee Co to J M Smucker before it was made public,” said Mr Tarlowe.
In the indictment filed last year, the government had said Mr 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”, Mr Gupta’s lawyer, Mr Gary Naftalis, said his client had not made any profits through his dealings with Mr Rajaratnam, who is currently serving 11 years in prison for running one of the biggest insider trading scams in the country.
“We would like to know what allegations there is other than the vague mumbo jumbo here (in the indictment). What’s their theory” Mr Naftalis said.
“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.
Mr Gupta, dressed in a dark blue suit, remained sombre throughout the hearing, exchanging only a few words with his legal team.
He politely declined to make any comments to reporters after the hearing. Naftalis too did not make any comments.
Prosecutors have alleged that Mr Rajaratnam made millions of dollars in profits and avoided massive losses through the inside information Mr Gupta passed on to him which the Indian-American learnt in his capacity as board member of Goldman Sachs and Procter and Gamble.