NEW YORK - The first witnesses have testified in the insider trading trial of Rajat Gupta, a former head of the global consulting firm McKinsey & Company, who is alleged to have engaged in insider trading while serving on the boards of Goldman Sachs Group and Procter & Gamble.
Federal prosecutors allege that Gupta telephoned a friend and investment partner, Raj Rajaratnam, seconds after a Goldman Sachs board meeting in September 2008 - to tell him that investor Warren Buffett was about to invest $5 billion in the company.
Rajaratnam's former subordinates at his Galleon Group hedge fund testified that he ordered a buy of thousands of shares of Goldman Sachs as soon as he finished the call - which phone company records showed was from Gupta's office.
Rajaratnam sold the shares for a profit of $1 million the next day, when the news of Buffett’s investment became public. He is now serving an 11-year prison term following his conviction in 2011 on 14 counts of insider trading.
The Indian-born Gupta has denied all six counts against him. His defense attorneys say that other top Goldman Sachs officials who were close to Rajaratnam might have been the source of the inside information.
Prosecutors do not accuse Gupta of profiting from the alleged crimes.
Gupta's friends say he had no motive to help Rajaratnam, and that he had other reasons to be in frequent touch - because he had invested with him, and as a philanthropist associated with the Global Fund to fight AIDS, Tuberculosis and Malaria, and other charities.
"There are thousands of facts, of which the government has picked half a dozen, and said these are proximate, therefore they are related," said Atul Kanagat, a former colleague of Gupta's who is attending the trial and speaking out in his defense. "But if you put the entire picture together, you're going to see that Rajat used to make thousands of calls and hundreds of calls to Rajaratnam, they just picked the ones that happened to fall at the same time as trades - and voila."
Gupta is also charged with enabling other illegal and profitable trades by tipping Rajaratnam weeks later that Goldman Sachs was about to report an unexpected decline - and with information about Procter & Gamble.
In opening statements, Gupta's defense attorneys told the jury that the government lacks any direct evidence - and that the case is "based on speculation, guesswork and suspicion."
If convicted, Gupta faces up to 25 years in prison.
Other leading business figures, including Buffett and Goldman Sachs head Lloyd Blankfein, may also be called to testify in the trial, which is expected to last about three weeks.