Rajat Gupta mulled suing Rajaratnam, witness tells jury

New York: As US prosecutors tried to nail ex-Goldman Sachs director Rajat Gupta for insider trading, a key witness told jurors that the Indian-American mulled suing convicted hedge fund founder Raj Rajaratnam after losing a whopping $10 million in the 2008 stock market collapse.

Former McKinsey executive Anil Kumar, during Gupta’s high-profile trial in a Manhattan court yesterday, spoke about the relationship between Gupta and Sri Lanka-born Rajaratnam, the founder of Galleon Group.

Kumar’s testimony came on the same day when Goldman Sachs Group CEO Lloyd Blankfein took the witness stand for the second time in over a year in an insider trading trial. Blanfien had earlier given his testimony in the trial of Rajaratnam, who is serving an 11-year prison sentence.

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[caption id=“attachment_333113” align=“alignleft” width=“380” caption=“Rajat Gupta. Brendan McDermid/Reuters”]  [/caption]

Kumar, Gupta’s protege at the global consulting firm McKinsey and one of the key government witnesses testifying against the former Goldman Sachs director, told jurors that Gupta had invested $10 million in the Voyager Fund in 2008, while Rajaratnam had invested $40 million, and the two had borrowed $300 million from Lehman Brothers for the fund.

“He said that the $10 million had almost doubled in size over the years,” Kumar said of 63-year-old Gupta.

Later, due to the 2008 stock market collapse, Gupta’s investment in the fund had been wiped off.

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Kumar said Gupta was “annoyed” with Rajaratnam for the way he had handled his money and had contemplated suing Rajaratnam.

In cross-examination, Kumar testified that Gupta had complained in 2008, before the 2009 lawsuit threat, that Rajaratnam had “dropped the ball” in managing the fund.

“He’s generally a calm guy,” Kumar said of Gupta. “That’s quite a bit of money to lose.”

Gupta eventually concluded that Rajaratnam had taken money out of the Voyager account without telling him, Kumar said.

“He was very annoyed,” Kumar testified. “He told me he was about to sue Rajaratnam.”

Kumar said Gupta had visited him at his apartment in February or March 2009 after learning that Rajaratnam had withdrawn money from the fund without Gupta’s consent or knowledge.

“He said he’d discovered something that was quite distressing,” Kumar testified.

“Rajaratnam had removed some of the money for the fund for himself,” Kumar said, adding, “Gupta said ‘This is plain wrong, this is worse than not managing the money well, it’s

taking money out.’”

Blankfein, 57, one of the most high-profile government witnesses to take the stand so far in Gupta’s trial that began on 21 May, said in his testimony that discussions at the company’s board meetings were strictly confidential and the Indian-American was not authorised to disclose them.

“Anything discussed in a board meeting is confidential,” Blankfein said in a courtroom packed with media persons and general public, who had turned up to listen to him.

Blankfein did not look at Gupta as he walked up to the witness stand, but during a jury break as he left the courtroom the Goldman CEO appeared to nod to Gupta, raising his head and eyebrows. Gupta’s expression did not change.

During his testimony, Blankfein said “no”, when Assistant US Attorney Reed Brodsky asked him if he had ever authorised Gupta to discuss anything that was confidential about the board meetings, particularly one held in St Petersburg, Russia, in June 2008 when the board discussed whether to buy a commercial bank or insurer.

“You’re not supposed to discuss,” he said.

PTI