mr rajaratnam

DealBook: Former Goldman Director Gupta to Stay Free Pending His Appeal

December 4, 2012 by NewsMaker Leave a Comment

Spencer Platt/Getty ImagesRajat K. Gupta was sentenced to two years in prison for leaking boardroom secrets to a former hedge fund manager.

A former Goldman Sachs director Rajat K. Gupta can remain free on bail while he challenges his insider-trading conviction, a federal appeals court ruled on Tuesday.

In a surprise decision, the United States Court of Appeals for the Second Circuit in Manhattan ruled that Mr. Gupta will not have to report to prison until his appeal his heard, a process that can take as long as a year. He was set to start serving his two-year sentence on Jan. 8.

Mr. Gupta, 64, was found guilty in June of leaking Goldman’s boardroom secrets to his friend, the hedge fund manager Raj Rajaratnam.

Tuesday’s ruling suggests that Mr. Gupta persuaded the judges that he has legitimate issues to argue on appeal. The same federal appeals court had denied a request by Mr. Rajaratnam to remain free on bail pending his appeal. Mr. Rajaratnam is serving an 11-year prison term.

Mr. Gupta’s lawyers are expected to make several arguments in pushing for his conviction to be overturned. The most significant issue on appeal is expected to be the government’s use of the wiretaps during the trial. Judge Jed S. Rakoff, the trial-court judge, allowed the jury to hear incriminating wiretapped conversations involving Mr. Rajaratnam and his traders that suggested he had a source inside of Goldman.

”I heard yesterday from somebody who’s on the board of Goldman Sachs that they are going to lose $2 per share,” said Mr. Rajaratnam to one of his colleagues, on a wiretapped call, in October 2008.

Multimedia: Insider Trading

Without the wiretaps, prosecutors would have had to rely on circumstantial evidence — telephone bills and trading records — to prove their case.

Mr. Gupta’s lawyers had argued that because the conversations were between Mr. Rajaratnam and his employees, the judge should declare them inadmissible hearsay evidence, meaning that they were too unreliable to be used against Mr. Gupta.

Another issue that Mr. Gupta’s lawyers are expected to raise is that Judge Rakoff erred in curbing testimony by Mr. Gupta’s daughter about her father’s deteriorating relationship with Mr. Rajaratnam.

Mr. Gupta, who lives in Westport, Conn., has been free on $10 million bail since his arrest in October 2011. In addition to a team of lawyers from Kramer Levin Naftalis Frankel that have been representing him, Mr. Gupta hired Seth P. Waxman, a noted appellate lawyer, to help handle his appeal. Mr. Waxman, a partner at WilmerHale, is a former United States solicitor general who has argued more than 50 cases before the United States Supreme Court.

The court is expected to hear Mr. Gupta’s appeal this spring.

Article source: http://dealbook.nytimes.com/2012/12/04/former-goldman-director-gupta-to-stay-free-pending-his-appeal/?partner=rss&emc=rss

Filed Under: Business News Tagged With: k gupta, mr rajaratnam, rajat

DealBook: Victory Spurs Speculation on Bharara’s Next Move

June 16, 2012 by NewsMaker Leave a Comment

Lucas Jackson/ReutersFormer Goldman Sachs board member Rajat Gupta (R) leaves Manhattan Federal Court with his lawyer, Gary Naftalis, following a guilty verdict.

With the conviction of Rajat K. Gupta, the United States attorney in Manhattan, Preet Bharara, has now secured the biggest scalp yet in the government’s broad campaign against insider trading on Wall Street.

A victory in a case that relied almost entirely on circumstantial evidence is sure to embolden prosecutors in their pursuit of hedge fund traders and their tippers.

The government built its case against Mr. Gupta on evidence like the timing of phone and trading records, showing that incriminating wiretaps — like those used to powerful effect in the trial of Raj Rajaratnam, the hedge fund manager who received the tips from Mr. Gupta and who was convicted of insider trading last year — were not a requisite to convince a jury of guilt.

But after nearly five years of investigations and 60 convictions of hedge fund traders and corporate executives, a question looms for Mr. Bharara and his team of federal prosecutors:

Is it time to move on?

Several top prosecutors have done just that. Christopher L. Garcia, who helped lead the government’s widespread crackdown of insider trading, left in February. Jonathan R. Streeter, the lead prosecutor in the case against Mr. Rajaratnam, left earlier this year, as did Andrew Michaelson, who was crucial in bringing and prosecuting the Galleon case.

And the Gupta trial is expected to be the last for the prosecutor Reed Brodsky, who also prosecuted Mr. Rajaratnam.

Mr. Bharara himself appears to have shifted his focus — at least publicly — away from the prosecution of financial fraud. In recent months, cybercrime has become a top concern, with Mr. Bharara mentioning the subject with increasing frequency in articles and speeches, just as he had in past years with insider trading. Indeed, even as his office was busy trying Mr. Gupta, Mr. Bharara wrote an op-ed article in The New York Times, saying that he had “come to worry about few things as much as the gathering cyberthreat.” At a cybersecurity conference in January, he listed it as his top concern.

“Of all the issues I face as United States attorney — and there are many, many things that I have to deal with that are scary — cyberthreat in all of its breadth, variety and complexity is what worries me the most, the absolute most,” he told attendees.

So far, his office has brought just a handful of such cases, and not all have been home runs. In January, prosecutors charged two Russians with stealing personal and financial information from United States citizens through the use of computer programs. Last year, an appeals court vacated the conviction of a Goldman Sachs computer programmer accused of stealing trading programs from the investment bank.

It is unlikely, however, that insider trading investigations will grind to a halt anytime soon. Several cases remain outstanding, including the prosecution of Anthony Chiasson, a co-founder of the once-prominent hedge fund Level Global Investors. And examinations of other hedge funds continue, as the remnants and offshoots of the Rajaratnam investigation wend their way through the pipeline.

The Federal Bureau of Investigation has also indicated there could be much more to come, potentially placing those inquiries at odds with Mr. Bharara’s office. Top investigators at the bureau recently said the agency could pursue insider trading for the next five years. After spending years to crack the surface of Wall Street, authorities say they have a vast network of sources embedded among the inner circles of high finance that they can tap for new leads.

At the same time, the Securities and Exchange Commission continues to bring civil cases, no matter how small. The agency recently charged a paralegal and her father in Montana who made $67,000 trading off confidential information.

The crackdown on insider trading in recent years has drawn some criticism from those who question why big bank executives have not been charged over their actions in the financial crisis. While federal authorities have started investigations of the large banks, few have materialized into major criminal cases. Mr. Bharara, who became the United States attorney in Manhattan in 2009 after serving as chief counsel to Senator Charles E. Schumer, Democrat of New York, has bristled at such criticism, arguing that while the banks may have been irresponsible, that does not make their actions criminal.

Whatever his plans now, insider trading prosecutions have served Mr. Bharara well during his tenure. When he arrived at the office, prosecutors were already preparing charges against Mr. Rajaratnam, the result of a sprawling, multiyear investigation into one of the world’s most prominent hedge fund managers. Many of the charges brought by Mr. Bharara have been an outgrowth of that case.

The successful prosecutions have created a glow of media attention around Mr. Bharara, who follows a long line of prominent people in the office, including Rudolph W. Giuliani. A Time magazine cover in February featured a close-up of Mr. Bharara with the headline “This Man Is Busting Wall Street” superimposed on it. The cover ruffled feathers among colleagues at the United States attorney’s office and at the F.B.I., who felt Mr. Bharara was taking too much credit.

Many inside the office do not expect Mr. Bharara to remain in his current position much longer. Some suspect he will soon follow his colleagues to a corporate law firm, where he would very likely command a multimillion-dollar salary. And there is speculation that he could find himself on the short list of candidates to replace Eric H. Holder Jr., the United States attorney general, if President Obama is re-elected and Mr. Holder leaves.

Mr. Bharara, for his part, has said that he has the best job in the world and intends to keep it.

Article source: http://dealbook.nytimes.com/2012/06/15/victory-spurs-speculation-on-bhararas-next-move/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: andrew michaelson, mr rajaratnam, streeter

DealBook: Rajat Gupta Seeks to Dismiss Counts and Toss Wiretaps

January 4, 2012 by NewsMaker Leave a Comment

Eric Piermont/Agence France-Presse — Getty ImagesRajat K. Gupta.

Lawyers for Rajat K. Gupta, a former director of Goldman Sachs charged with insider trading, filed a flurry of pleadings late Tuesday, seeking to dismiss counts, suppress wiretaps and force the government to clarify its indictment.

The filings outline the contours of Mr. Gupta’s defense as he prepares for a trial on April 9.

“The indictment reflects, and attempts to mask, the weakness of the case against Mr. Gupta,” his lawyers at Kramer Levin Naftalis Frankel wrote in their legal filing.

Mr. Gupta, 63, is the former head of the consulting firm McKinsey Company and, in addition to serving on Goldman’s board, was a director at Procter Gamble and AMR, the parent company of American Airlines. Described by his lawyers as “a self-made man who earned his sterling reputation through nearly 40 years as a global business leader and engaged philanthropist,” he is the most prominent businessman ensnared by the government’s widespread crackdown on insider trading.

In October, federal prosecutors charged him with five counts of securities fraud and one count of conspiracy for leaking Goldman and P.G.’s corporate secrets to Raj Rajaratnam, the former hedge fund manager serving an 11-year prison term after a jury convicted him of insider trading last spring.

On Tuesday, Mr. Gupta’s lawyers made three primary motions with the court seeking to buttress their client’s defense. In one, they asked for a dismissal of some of the five counts against Mr. Gupta.

“The indictment focuses on just two instances in which Mr. Rajaratnam is said to have traded on inside information he supposedly received from Mr. Gupta, but improperly uses those instances to create five purportedly separate substantive securities charges.”

A second filing asks the court to force the government to provide a “bill of particulars,” or a clarification of the indictment. Mr. Gupta’s lawyers say that the mountain of documents produced by the government during discovery — about 2.2 million pages and thousands of intercepted calls, with more to come — does not substitute for a bill of particulars.

A third court submission requests that Jed S. Rakoff, the presiding judge in the case, bar the government from using wiretap evidence against Mr. Gupta. Unlike the case against Mr. Rajaratnam, who ran the Galleon Group hedge fund, the government has no direct evidence, including telephone recordings, that showed Mr. Gupta engaged in insider trading. Instead, the government plans to build a case based on circumstantial evidence — like phone bills and trading records — to establish Mr. Gupta’s guilt.

Yet, there are at least two wiretapped conversations between Mr. Rajaratnam and his colleagues that, if used at trial, could be powerful evidence against Mr. Gupta. In one call, for instance, Mr. Rajaratnam tells a colleague, ”I heard yesterday from somebody who’s on the board of Goldman Sachs that they are going to lose $2 per share.”

Despite a judge’s refusal to bar the use of wiretaps in the Rajaratnam trial, Mr. Gupta’s lawyers argue that this ruling was incorrect. Mr. Rajaratnam’s lawyers are also expected to argue on appeal that the use of wiretaps against their client was unconstitutional.

A spokeswoman for the United States attorney’s office in Manhattan declined to comment.

Article source: http://feeds.nytimes.com/click.phdo?i=586d0d499e3ae4ce7fc49fe9ce553eb9

Filed Under: Business News Tagged With: mckinsey company, mr rajaratnam, sterling reputation

DealBook: Caught in a Wide Web, a Trader Faces Prison

October 12, 2011 by NewsMaker Leave a Comment

John Marshall Mantel for The New York TimesMichael A. Kimelman, with his wife, Lisa Kimelman, exits Federal District Court in Manhattan on Wednesday.

Last Friday, on a crystalline autumn afternoon, Michael A. Kimelman sat in the backyard of his home in Larchmont, N.Y. His toddler son was perched on his lap, sucking on a pacifier. His older son played baseball with a friend, while his wife and daughter gawked at 10 fresh-egg producing hens housed in their new chicken coop.

It was a vision of suburban bliss, save one grim fact: Mr. Kimelman is on his way to prison.

At the Federal District Court in Manhattan on Wednesday, a judge sentenced Mr. Kimelman, a 40-year-old former trader convicted of insider trading, to two and a half years. He could have avoided prison by accepting a plea deal, but had rejected the offer and took his case to trial. In June, a jury found him guilty.

“This is a serious crime,” said Judge Richard A. Sullivan in a courtroom filled with Mr. Kimelman’s family, neighbors, and college fraternity brothers. “When people engage in this kind of conduct and get caught, they will get punished.”

Two years ago, Preet S. Bharara, the United States attorney in Manhattan, brought charges against 26 defendants in a seven-year insider trading conspiracy. At its center was Raj Rajaratnam, who once managed $8 billion at the Galleon Group and was among the world’s wealthiest hedge fund managers. He was convicted at trial, and prosecutors have asked for a prison term of as many as 24 years.

On Thursday, a judge will sentence Mr. Rajaratnam and is expected to hand down the longest prison term ever for insider trading.

But in Mr. Rajaratnam’s shadows lurked a mostly anonymous network of corporate executives, lawyers, consultants, and traders who exchanged confidential information about publicly traded companies. Twenty-four have either pleaded guilty or been convicted; one remains a fugitive.

Of the 13 who have received sentences, their average term has been three years.

The government placed Mr. Kimelman, a 40-year-old journeyman trader, at the outer edge of Mr. Rajaratnam’s insider trading web. His role in the case was marginal enough that prosecutors offered Mr. Kimelman a deal shortly after his arrest in 2009: Plead guilty to a charge of participating in the conspiracy and receive no prison time, only a sentence of probation.

“Of course I have regrets about not pleading guilty; I could’ve ended this ordeal two years ago,” said Mr. Kimelman in an interview at his home last week.

“But at the same time, I wouldn’t have been able to look myself in the mirror if I admitted to doing something that I didn’t do.”

Mr. Kimelman grew up in a comfortable, middle-class home in Tarzana, Calif., a town in the San Fernando Valley north of Los Angeles. He went east for college, graduating from Lafayette College in Pennsylvania, and then finished near the top of his class at the University of Southern California’s law school.

He landed a job practicing corporate law at Sullivan Cromwell, one of the country’s most prominent firms, but found the work uninspiring.

He had a growing interest in the stock market, and with the bull market raging in the late 1990s, he left law.

“At S.C., I was working 100 hours a week and sleeping under my desk,” Mr. Kimelman said. “Trading stocks seemed like a better life.”

He pursued a career in the fast-money world of “prop shops,” or proprietary trading firms, where dozens of traders buy and sell stocks with the firm’s money. The traders then split their profits with the firm, typically 50-50.

Though Mr. Kimelman lived comfortably, he was hardly a Wall Street titan. In his best year, Mr. Kimelman said he earned about $400,000 and never had more than $1 million in the bank.

In 2008, Mr. Kimelman teamed up with a friend, Emanuel Goffer, to form their own proprietary trading firm, Incremental Capital. They needed seed money to start the business, so they looked to Emanuel’s brother, Zvi Goffer, a fast-talking trader from Brooklyn. Zvi had recently landed a coveted trading job at Galleon working under Mr. Rajaratnam.

Zvi Goffer held out the promise of Mr. Rajaratnam investing $10 million into Incremental and getting access to Galleon’s research.

Aligning with Galleon and Mr. Rajaratnam, who was considered one of Wall Street’s savviest stock pickers, would have been a huge coup for Incremental.

“It’s very much who you know on Wall Street,” Mr. Kimelman said. “Some guys do their own work, but there is also lots of piggybacking off of other people’s stock ideas.”

Mr. Kimelman met Mr. Rajaratnam once while visiting Zvi Goffer at Galleon’s office. They shook hands, exchanged niceties. But Mr. Rajaratnam never put money into Incremental, and Galleon soon fired Zvi for poor performance. Zvi, nicknamed “Octopussy” because his arms reached into so many sources of information, joined Incremental and promised to use his contacts to help build the firm.

“Some guys under-promise and over-deliver,” Mr. Kimelman said. “Zvi was the exact opposite.”

At 5:30 a.m. on Nov. 5, 2009, a half dozen federal agents showed up Mr. Kimelman’s front door. While the agents searched the house with flashlights, his wife, Lisa, sequestered the children in the master bedroom. They handcuffed Mr. Kimelman and drove him away.

Federal prosecutors accused Zvi Goffer of paying nearly $100,000 in cash bribes to get secret information about big merger deals from two corporate lawyers. They said that Emanuel Goffer and Mr. Kimelman, as part of the conspiracy, knew about Zvi Goffer’s scheme. They also charged Mr. Kimelman with illegally trading in shares of 3Com in 2007.

During trial, the government played secretly recorded conversations during which Zvi Goffer arranged with Mr. Kimelman to meet in person rather than discuss things over the phone.

On 3Com, prosecutors showed phone records indicating that Zvi Goffer, who had received an illegal tip that the company was a takeover target, spoke with Mr. Kimelman for 25 minutes on the night of Aug. 7.

On Aug. 8, trading records showed that Mr. Kimelman bought a large block of 3Com stock just before a deal was announced. He earned about $250,000 in profits on the trade, the government said.

Mr. Kimelman’s lawyers blasted the government’s case, arguing that it was based on innuendo and guilt by association. They argued that even if Mr. Goffer told Mr. Kimelman to buy 3Com, there was no evidence that Mr. Kimelman knew that the recommendation was based on illegal information.

“They charged Michael Kimelman with insider trading, yet they have not brought a single witness to this courtroom to say, ’I told Mike about an insider,’” said Michael Sommer, a lawyer for Mr. Kimelman at Wilson Sonsini Goodrich Rosati, in his closing statement. “And with tens of thousands of recordings, text messages, instant messages, e-mails, there is not one which shows the slightest misconduct by this man.”

Judge Sullivan acknowledged that the jury’s decision was a close one.

“I thought it was a verdict that could go either way,” said the judge during a pre-sentencing conference.

In recent weeks, Mr. Kimelman has spoken with about dozen former prisoners about their incarcerations and received a range of advice. Find something to keep you busy so don’t go crazy. Keep your head down and you won’t get beat up.

Lisa Kimelman is a former Martha Stewart employee who now runs her own catering business. She has kept a sense of humor, writing a story in the October issue of Elle magazine about selecting a wardrobe for her husband’s trial. But Ms. Kimelman, the daughter of Michael H. Moskow, the former longtime president of the Federal Reserve Bank of Chicago, is also bitter about her family’s plight.

“My father worked for three presidents, and I was a White House intern,” Ms. Kimelman said. “I believed in our government, and it never occurred to me that our system would fail somebody.”

They have yet to tell their children, ages 7, 5 and 2, that their father is going to jail. Mr. Kimelman said that they wanted to learn his exact sentence before delivering the news. He worries about his family’s financial situation; his savings are wiped out and he is in substantial debt. Within 60 days, he must report to the Bureau of Prisons, which will assign him to a correctional facility.

Last week, as a reporter asked Mr. Kimelman his feelings about going to jail, Cam, his red-headed, freckled 5-year-old boy, ran up to him.

“Daddy, daddy, can I go inside and play Wii?” he asked.

“It’s the kids,” Mr. Kimelman said. “It’s the kids that kill you.”

Article source: http://feeds.nytimes.com/click.phdo?i=e47288e8990dbaf649cb57b1d59d22cb

Filed Under: Business News Tagged With: hedge fund managers, mr rajaratnam, raj rajaratnam

DealBook: Former Nasdaq Executive Is Sentenced

August 12, 2011 by NewsMaker Leave a Comment

A former executive at the Nasdaq OMX Group was sentenced to three and a half years in prison on Friday after admitting to earning about $750,000 by trading on secret corporate information.

Donald L. Johnson, a onetime managing director at Nasdaq, pleaded guilty to one count of securities fraud. He said that from 2006 until his retirement in 2009 he traded illegally in the stocks of companies that provided him with advance word about their earnings or personnel changes.

“If I had to come up with a word for what I did, it is stupidity,” Mr. Johnson, 57, told a federal judge in Alexandria, Virginia, on Friday, according to Bloomberg News. “There aren’t any answers to explain my activity.”

As a senior executive on the stock exchange’s so-called market intelligence desk, Mr. Johnson worked with companies who wanted to understand how impending news might affect their share prices. In working with Mr. Johnson, the companies would routinely disclose confidential information to him.

Mr. Johnson took the data and, using his work computer, traded in an online brokerage account in his wife’s name.

At the time of his guilty plea in May, Lanny A. Breuer, assistant attorney general of the Justice Department’s criminal division, called Mr. Johnson “a fox in a henhouse” and described his crime as “a particularly shocking abuse of trust.”

Mr. Johnson’s prison term fell in the middle of the 37-to-46-month range suggested by nonbinding federal sentencing guidelines. The proposed range is tied in large part to the amount of illegal profits earned from the crime.

His sentence came during a week when federal prosecutors asked a judge to sentence Raj Rajaratnam, a former hedge fund manager and the most prominent figure in the government’s sweeping insider trading investigation, to a recommended term of 19 and a half to 24 and a half years in prison. The government said that Mr. Rajaratnam gained $64 million in insider trading profits.

Article source: http://feeds.nytimes.com/click.phdo?i=a416c92b3d49c34c57b53a17435aeb43

Filed Under: Business News Tagged With: l johnson, mr rajaratnam, work computer

DealBook: S.E.C. Delays Rajat Gupta’s Trial for Six Months

June 30, 2011 by NewsMaker Leave a Comment

Alessandro Della Bella/Keystone, via Associated PressRajat K. Gupta.

8:17 p.m. | Updated

The curious case of Rajat K. Gupta just got curiouser.

Mr. Gupta, the former Goldman Sachs director and onetime head of McKinsey Company, was scheduled to stand trial on July 18 on civil charges that he had leaked corporate secrets to Raj Rajaratnam, the billionaire hedge fund manager convicted of insider trading last month.

But the trial has been delayed for at least six months, according to two people familiar with the case who would discuss it only on the condition of anonymity.

The lengthy postponement in the case, brought by the Securities and Exchange Commission, raises questions about the fate of Mr. Gupta, the most prominent business executive ensnared by the government’s insider-trading crackdown.

The United States attorney’s office in Manhattan, which has been investigating Mr. Gupta’s role in the case for at least three years, named Mr. Gupta a co-conspirator of Mr. Rajaratnam’s but has not charged him criminally.

Just a week before Mr. Rajaratnam’s trial began, the S.E.C. brought an unusual civil administrative proceeding against Mr. Gupta, accusing him of tipping Mr. Rajaratnam about confidential results at Goldman and Procter Gamble, where he also served as a director. Among the tips was news that Berkshire Hathaway, run by Warren E. Buffett, had agreed to invest $5 billion in Goldman at the peak of the financial crisis, the S.E.C. said.

Gary P. Naftalis, a lawyer for Mr. Gupta, has called the S.E.C.’s case “totally baseless.”

Mr. Gupta played a starring role at Mr. Rajaratnam’s trial. Although he did not take the witness stand, the jury heard Mr. Gupta’s name throughout the testimony. They listened to a wiretap in which Mr. Gupta told Mr. Rajaratnam about secret Goldman board discussions. They also heard a recording of Mr. Rajaratnam telling a colleague that a Goldman director had leaked the bank’s earnings to him.

It is unclear why federal prosecutors have not charged Mr. Gupta, but the government appears to have a weaker criminal case against him than it did against some of Mr. Rajaratnam’s other co-conspirators.

Certain evidentiary rules could prohibit prosecutors from using two incriminating wiretaps on which Mr. Rajaratnam told colleagues about tips he had received about Goldman. Without those tapes, the government would be forced to rely on more circumstantial evidence at trial — like phone bills and trading records — to establish Mr. Gupta’s guilt.

In the S.E.C.’s civil proceeding, which is tried not before a jury but an S.E.C. administrative law judge in Washington, the agency has a lower burden of proof than federal prosecutors would have in a criminal case. The S.E.C. also would not be subject to the rules of evidence that in a criminal trial could make the case against Mr. Gupta more difficult.

Lawyers for Mr. Gupta have sued the S.E.C. to get his case moved to federal court, contending that the agency violated his right to jury trial by bringing the administrative proceeding. That lawsuit, which is before Judge Jed S. Rakoff in Federal District Court in Manhattan, is not the reason for the suspension of Mr. Gupta’s S.E.C. trial, according to people familiar with the case.

So what is the cause for the long delay? No one will say. Mr. Naftalis, Mr. Gupta’s lawyer, declined to comment, as did spokesmen for the S.E.C. and the United States attorney’s office.

Behind-the-scenes dickering between the Justice Department and the S.E.C. could be behind the postponement, legal experts say. The United States attorney’s office in Manhattan had tried unsuccessfully to get the S.E.C. to delay bringing its civil action against Mr. Gupta until the conclusion of Mr. Rajaratnam’s trial, according to court filings. Now, if federal prosecutors are still weighing charges against Mr. Gupta, they could again be asking the S.E.C. to hold off.

“The timing of civil and criminal proceedings is never preordained, but typically a matter of negotiations between the S.E.C. and federal prosecutors,” said Eli J. Richardson, a white-collar defense lawyer at Bass, Berry Sims and a former prosecutor. “The substantial delay in Gupta’s trial without public explanation suggests that’s what’s likely going on here.”

Article source: http://feeds.nytimes.com/click.phdo?i=cdbbcc5e32b16c8dff35941dd0867e1c

Filed Under: Business News Tagged With: berkshire hathaway, business executive, mr rajaratnam

DealBook: Zvi Goffer Found Guilty in Insider Trading Case

June 13, 2011 by NewsMaker Leave a Comment

A federal jury in Manhattan on Monday found Zvi Goffer and two co-conspirators guilty of insider trading, the latest development in the government’s investigation into insider trading at hedge funds.

Mr. Goffer, his brother Emanuel Goffer and Michael A. Kimelman were convicted of participating in an insider trading scheme that produced more than $20 million in illegal profits.

The case was connected to the prosecution of Raj Rajaratnam, the hedge fund tycoon and co-founder of the Galleon Group, who was found guilty last month in the largest insider trading case in a generation. Zvi Goffer, who sat in on much of Mr. Rajaratnam’s trial, was employed by Galleon.

Like the case against Mr. Rajaratnam, this trial had phone wiretaps playing a central role. The jury heard recordings of Mr. Goffer swapping secret corporate information with fellow traders.

Much of the illegal trading featured in the Mr. Goffer trial was based on on illegal tips about mergers and acquisitions from two corporate lawyers at Ropes Gray in Manhattan. The two lawyers, Arthur Cutillo and Brien Santarlas, had previously pleaded guilty to providing Mr. Goffer and others with information about the secret deals. Mr. Santerlas testified during the trial.

Among the transactions the lawyers leaked to Mr. Goffer: TPG’s $1.3 billion acquisition of Axcan Pharam in November 2007 and Bain Capital’s agreement to pay $2.2 billion for 3Com in September of that year.

Zvi Goffer, 34, worked at a number of different trading shops before joining Galleon in 2008. After just nine months there he left to start his own hedge fund, Incremental Capital, with his brother and Mr. Kimelman.

A parallel civil complaint brought by the Securities and Exchange Commission said that Mr. Goffer’s nickname among his fellow traders was “Octopussy” — a reference to the James Bond movie — because his arms reached into so many sources of information.

During the trial, William Barzee, the lawyer for Mr. Goffer, described his client as a “gold miner” who panned for gold along the “river of gossip.”

Mr. Kimelman, who was tried as one of Mr. Goffer’s co-conspirators, practiced law at Sullivan Cromwell before becoming a Wall Street trader.

“We are enormously disappointed with the verdict as we believed the evidence clearly showed that Mr. Kimelman had not engaged in any insider trading,” said Michael Sommer, the lawyer for Mr. Kimelman. “We will of course pursue all avenues of appeal.”

Mr. Barzee and Michael Ross, the lawyer for Emanuel Goffer, did not immediately respond to a request for comment.

Article source: http://feeds.nytimes.com/click.phdo?i=de96ec101a70a0651d8db8f70ff07fb5

Filed Under: Business News Tagged With: bain capital, hedge fund, mr rajaratnam

DealBook: Stack of Evidence Sealed Galleon Case, Juror Says

May 15, 2011 by NewsMaker Leave a Comment

“Dear Honorable Judge Holwell,” the handwritten note from the foreman read last Wednesday morning, “the jury has come to a unanimous decision.”

Then, minutes later, the stress and emotion that had been building for two months spilled out into the tight quarters of the deliberation room at the United States District Court in Manhattan. Tears flowed. Jurors hugged, trading words of comfort, while others stepped into the bathroom to compose themselves. One juror asked that they say a prayer, so the group huddled and prayed.

They prayed, said Leila Gonzalez Gorman, one of the jurors, for the witnesses, their families, their children and their parents. And they prayed for Raj Rajaratnam, the billionaire hedge fund manager whom they had just found guilty of all 14 counts of conspiracy and securities fraud brought against him, capping one of the largest insider trading cases in a generation.

Still, for all the emotion at the end, Ms. Gorman said the jury was clear-eyed and confident about the decision it handed to Judge Richard J. Holwell.

“My impression was that he thought he could get away with what he was doing because he never got his hands dirty,” said Ms. Gorman, a 44-year-old second grade teacher from Westchester County.

“He was the mastermind, and everything pointed to the mastermind,” she added.

In a wide-ranging interview in the lobby of her apartment building on Saturday, Ms. Gorman talked about the trial that consumed more than two months of her life and the lives of her fellow jurors. She said the jury — a hodgepodge of government workers, teachers and professionals from Westchester County, Manhattan and the Bronx — was swayed by the constellation of evidence and witness testimony that showed that Mr. Rajaratnam had carefully collected illegal tips and based his trades on that information.

Since the jury announced its verdict, much of the focus has been on the government’s wiretap evidence that caught Mr. Rajaratnam swapping stock tips with a range of sources. Yet Ms. Gorman said the recordings were not necessarily the smoking guns.

“I wouldn’t exactly say the tapes were the most convincing,” she said. “There were numerous things that were convincing. We looked at e-mails, we matched conversations, we looked at the graphs.” The jurors, armed with a pile of sticky notes and colored markers, meticulously pooled their notes together to reconstruct the timeline around Mr. Rajaratnam’s trades in stocks like Clearwire and Intel.

She said the timing of his trades — often struck minutes after telephone calls with his informants — was simply too uncanny.

“We said, ‘On this day he was going short, short, short,’“ she said. “So how would you know that, unless you had a little birdie whispering in your ear?”

She added, “He knew exactly when to go big.”

In part, Ms. Gorman formed a negative opinion of Mr. Rajaratnam because of the name of his hedge fund, the Galleon Group.

“Galleon buccaneers, those are pirates, and he named his company after pirates,” she said. “And if you look at the history of pirates, they’re thieves.”

The jury also formed strong impressions of the witnesses, a cast of characters that included the chief executive of Goldman Sachs, Lloyd C. Blankfein, and members of Mr. Rajaratnam’s once-tight inner circle. The defense repeatedly attacked the credibility of the government’s cooperating witnesses, but Ms. Gorman said she didn’t buy it. She said she believed the testimonies of Rajiv Goel, Anil Kumar and Adam Smith — the government’s three main witnesses.

The testimony of Mr. Blankfein also had a lasting impact — but not because she was starstruck. Ms. Gorman said she didn’t really know who he was.

“When they said he is the C.E.O. of Goldman Sachs, I said to myself, ‘Oh my God, I hope he’s not one of these guys, what is going on here?,” she said. Mr. Blankfein testified that a former Goldman director had leaked confidential board discussions to Mr. Rajaratnam.

“But when he actually talked, I thought, ‘Oh good, he’s honest.’”

She warmed to his appearance and his demeanor, a “cute little smirk, a painted-on smile, well-spoken, bright-eyed,” she said. But it seems the Wall Street titan did not hold a candle to the three clean-cut prosecutors — Jonathan Streeter, Reed Brodsky and Andrew Michaelson.

“We called them all gorgeous,” Ms. Gorman said. “They were all hot.” She nicknamed Mr. Brodsky Napoleon, a tribute to his fiery attitude and how he dramatically brushed back his dark hair with his hand. She said the female jurors often joked about calling “dibs” on the more attractive members of the courtroom.

The 12 days of deliberation were punctuated by moments of levity, but the jurors approached the case with gravity. After the group was dismissed for deliberations, the jury sat silent for about 20 minutes, absorbing the herculean task ahead. Then they dove into the files, methodically laying out all the charges and assigning specific roles. If a someone wanted to speak, the juror would have to raise a hand.

Although there were several tense moments — Ms. Gorman recalls telling one juror, “You can’t tell me not to go to the bathroom, go to hell” — she said they rarely disagreed on the facts of the case.

At the beginning of the deliberations, two jurors were less convinced of Mr. Rajaratnam’s guilt, largely moved by his philanthropic efforts in support of the Harlem Children’s Zone, a nonprofit group. Geoffrey Canada, the head of that organization, testified as a character witness for the defense.

“They were just sympathetic because he gave money to Harlem, so they wanted to see the good side.”

However, as the group analyzed the evidence, consensus quickly built. By April 29, the jurors were unanimous that he was guilty on all five conspiracy charges. Last Tuesday, the group was mainly settled on the remainder of the charges, but Wilson Thomas Jr., the alternate juror who came in as a last-minute replacement, needed a few more hours to meditate on the case.

The next day, Ms. Gorman bought several $2 scratch lottery tickets. It was her gift to her fellow jurors and a nod to a weekly tradition. On each Thursday during the trial, the group would pool their dollar bills and buy lottery tickets. She suspected they might not be together the next day.

And that morning, Mr. Thomas was ready and the jury took a final vote.

In the end, what brought down Mr. Rajaratnam was what lawyers refer to as those sticky facts, Ms. Gorman said.

“There were too many conversations and things from the testimonies that were leaning towards guilt,” she said.

Ben Protess contributed reporting.

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Filed Under: Business News Tagged With: fellow jurors, handwritten note, mr rajaratnam

DealBook: Jury Deliberation Begins on Fate of Galleon Chief

April 26, 2011 by NewsMaker Leave a Comment

John Marshall Mantel for The New York TimesRaj Rajaratnam, left, arriving at court with his lawyer, John Dowd.

7:17 p.m. | Updated

The biggest insider trading case in a generation is now in the hands of a federal jury.

The fate of Raj Rajaratnam, the billionaire co-founder of the Galleon Group hedge fund, lies with the teachers, nurses and public servants from Westchester County, Manhattan and the Bronx sitting on the jury, which began deliberating on Monday. Mr. Rajaratnam stands accused of making more than $50 million by trading stocks using insider tips.

After nearly four hours of deliberation, the jurors retired for the day. They will resume on Tuesday morning.

Earlier on Monday, a prosecutor finished his rebuttal to the defense’s closing statements. The prosecutor, Jonathan Streeter, began by acknowledging the jury’s waning patience with the seven-week trial and promised to be brief.

Mr. Streeter left jurors with a final plea to rely on their common sense, not on the assertions made by a defense team that had “twisted itself into knots” to distract them from seeing what was clear from the evidence.

“The defense has asked you ignore logic, forget reality and suspend common sense,” he said.

Azam Ahmed and Guilbert Gates/The New York Times Click on the above graphic to get a visual overview of the Galleon information network.

Judge Richard J. Holwell then charged the jurors, walking them through the 14 counts in the indictment against Mr. Rajaratnam, providing them with lengthy legal definitions for everything from reasonable doubt to conspiracy. The jurors sat at attention throughout the instructions.

As the focus of the case moved from the lawyers to the jurors, a shift could be detected among the courtroom artists. A mother and daughter team, in similar outfits of shiny black pants, metallic sweaters and red neckerchiefs, furiously sketched the scene ahead of a verdict.

The panel selected as its foreman a 56-year-old man from the Bronx who said he worked in graphic design at Apple. Joining him in deliberations are a retired bookkeeper and former Israeli Defense Forces volunteer, a customer service representative for the Metropolitan Transportation Authority and several education and school service employees.

During their deliberations on Monday, jurors asked the judge three questions, including whether they could be excused early because one juror had an appointment that began before 5 p.m., their typical dismissal time. The other questions pertained to exhibits presented by the two sides.

The courtroom scene shifted as those in the room waited for a verdict. Anxious lawyers milled about, hanging around the courtroom in case the jury had questions. Mr. Rajaratnam, for his part, appeared relaxed, sticking close by his defense team. The gaggle of reporters covering the trial killed the time reading The New Yorker or checking fantasy baseball statistics on their smartphones.

Television trucks from the cable news networks sat in front of the courthouse, their cameramen whiling away the day underneath makeshift white tents set up on Worth Street.

Tension in the courtroom spilled into the street briefly on Monday afternoon when Mr. Rajaratnam and his defense team left the courthouse, and a shoving match erupted between a photographer and Mr. Rajaratnam’s driver.

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Filed Under: Business News Tagged With: courtroom artists, mr rajaratnam, tuesday morning