Rajat Gupta's lawyer says others leaked on P&G

New York: A number of people other than Rajat Gupta could have leaked confidential information about Procter & Gamble Co’s sale of its Folgers coffee unit in 2008, Gupta’s lawyer implied to the jury at his insider-trading trial on Tuesday.

Gupta, a former director at P&G and Goldman Sachs Group Inc , is accused in US District Court in Manhattan of telling now-imprisoned hedge fund manager Raj Rajaratnam about the $3 billion Folgers sale to JM Smucker & Co before it was publicly announced on 4 June, 2008.

In his questioning of P&G Chief Financial Officer Jon Moeller, defense lawyer Gary Naftalis mentioned press leaks of the Folgers transaction and the array of lawyers, investment bankers, external-relations advisers and corporate tax specialists who worked on the deal.

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“So there were all of these people working on the transaction in addition to the Smucker’s people, true?” Naftalis asked Moeller, who responded: “Yes, that’s true.”

Gupta, 63, also a former global head of management consulting firm McKinsey & Co, is the most prominent corporate figure indicted in the US government’s recent crackdown on insider trading. He is charged with giving Rajaratnam tips involving Goldman and P&G between March 2007 and January 2009.

[caption id=“attachment_325401” align=“alignleft” width=“380” caption=“File photo of Rajat Gupta. Reuters”]  [/caption]

Gupta, who was arrested last October, has pleaded not guilty and argues that the prosecution’s evidence is circumstantial.

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One of the main defense arguments is that Galleon Group hedge fund founder Rajaratnam had a network of sources providing him with inside information. Rajaratnam, 53, was convicted a year ago on evidence largely based on court-approved wiretaps of his phones. He is appealing the use of wiretaps as he serves an 11-year prison term, the longest handed down for insider trading in the United States.

CALLS TO RAJARATNAM

Prosecutors also contend that the day before P&G announced quarterly earnings in January 2009, Gupta called Rajaratnam from Davos, Switzerland, and told him that P&G expected its organic sales to grow 2 percent to 5 percent for the fiscal year, less than the guidance previously provided to the market.

Moeller, who was called as a prosecution witness, testified under questioning by Assistant US Attorney Richard Tarlowe that the sales information was confidential until the company made an announcement to the public.

Also on Tuesday, a second juror on the 12-member panel dropped out of the trial due to a family emergency.

Juror No 4, an executive assistant at a hospital, was excused and replaced by an alternate, a marketing manager for a publishing company. The place of juror No 12, a professor of strategic design and behavior, was taken on Thursday by another of the four alternates, a retired librarian, also due to a family emergency.

The trial, which began 21 May, is expected to run about three weeks. To convict Gupta of insider trading, the jury must be convinced beyond a reasonable doubt that he breached his fiduciary duties and that he did it intentionally and in anticipation of at least some modest benefit in return.

The case is USA v Gupta, US District Court for the Southern District of New York, No. 11-907.

Reuters