by Rajat Gupta
As opening arguments commenced, Reed Brodsky, the lead prosecutor, took to the floor and told his version of the story. I’d become familiar with Brodsky through a couple of the pretrial hearings I’d attended, and I didn’t particularly like him. He was a brash, street-fighter type who had fought every one of our pretrial motions with great vigor. There was clearly no love lost between him and Gary. His opening was well prepared and confident, painting the case as a classic insider trading scheme in which rich and powerful men—sophisticated, highly accomplished graduates of elite, prestigious business schools—teamed up to cheat ordinary, hard-working investors. He even claimed that my intent was to allow my friends to make money off of the financial crisis—an argument clearly designed to gain the jury’s sympathy and paint me as a Wall Street villain. As expected, he concentrated on the September 23, 2008, incident following the Warren Buffett investment, playing up the drama of those months and my privileged position as “the ultimate corporate insider.” He also sought to reinforce his claims of a “pattern” with rhetorical tricks, repeating the same phrases to describe each incident so that they echoed through the courtroom with cumulative impact.
As for Voyager, he spun it as a joint venture in which Rajaratnam and I were “flying high and making huge profits” from 2007 to 2008. He acknowledged the fund’s collapse that fall, but in a strange twist that made no sense, he seemed to claim that my alleged tipping was part of an attempt to get Rajaratnam to repay my $10 million.
Before Gary could take his turn, the issue of mentioning my charitable work was discussed again, outside the presence of the jury. Brodsky wanted to ensure that Gary wouldn’t be referencing my “humanitarian character” in his opening remarks.
“Your Honor, just to be clear, he won’t mention AIDS, malaria, or tuberculosis.”
Rakoff appeared to find this funny, replying, “Or the bubonic plague.”
I personally didn’t think it was a joking matter—not the diseases themselves, nor this bizarre ruling that prevented my lawyers from mentioning the role I’d played in the fight to eradicate them. There I was sitting with my life’s work and reputation on the line and the judge was making fun of a serious legal discussion. I was further irritated when Gary chimed in, “Or even scurvy.” I’m sure his intention in continuing the joke was to stay on good terms with Judge Rakoff, but it rankled nonetheless.
“We Don’t Guess People Into Guilt”
Gary was energetic and passionate in his opening remarks, highlighting the absurdity of the idea that “in the twilight of an illustrious life” I would “decide knowingly, willingly, deliberately to suddenly one day become a criminal, and do it for no benefit.” It was, he pointed out, “a very strange insider trading case because the evidence will show that Rajat Gupta did no trading.” To drive the point home, he explained: I’d never sold a single share of stock in any of the companies involved. I’d never taken any payment. He highlighted the profound absence of real, hard evidence, despite the confidence with which Brodsky described the conversations he imagined had occurred. The prosecution’s claims, he declared, were based entirely on speculation and guesswork: “We don’t guess people into guilt in America.”
I wished I could believe that were true. But guesswork had already cost me my reputation, my career, and my ability to serve. Gary’s avowal of the presumption of innocence and the greatness of our justice system rang hollow to my ears. Yes, in theory, it was up to the government to meet what he called the “awesome burden of proof beyond a reasonable doubt,” but I couldn’t trust that this was really how it worked. I needed to tell a better story.
At the heart of Gary’s statement was an argument he’d made to me since the beginning of the case: to prove insider trading, the prosecution needed to show evidence of three things: one, that I provided information to Rajaratnam; two, that I did so expecting him to trade on it, as part of an explicit quid pro quo agreement; and three, that I received some benefit in return. This last point was critical in my case. While there is no statutory definition of insider trading, the “controlling decision” referred to by most judges comes from a 1983 Supreme Court case, Dirks v. S.E.C.,* which established that to prove a tipper guilty of insider trading “the test is whether the insider personally will benefit, directly or indirectly, from his disclosure. Absent some personal gain, there has been no breach of duty to stockholders.”1
According to the indictment, I had “benefited and hoped to benefit from [my] friendship and business relationship with Rajaratnam in various ways, some of which were financial.” Yet no evidence had been provided for this hopelessly vague claim. Of course, there was none, because it didn’t happen.
In contrast, every other individual who had been charged with tipping Rajaratnam had a clear quid pro quo in place and received personal monetary benefit. Anil Kumar made $2 million–$3 million, channeled into the infamous Swiss bank account in the name of his maid. Former Intel executive Rajiv Goel received $600,000—enough to buy a home and to provide care for his ailing father. Rajaratnam also earned $700,000–$800,000 on Goel’s behalf in Goel’s personal account. Intel-marketer-turned-stock-analyst Roomy Khan got tips from Rajaratnam, which she traded on very profitably herself, making approximately $1.5 million. She claims he offered her money to stay at Intel and feed him information. Danielle Chiesi’s hedge fund made at least $1.7 million trading on illegal information, much of which she received from Rajaratnam. Adam Smith and Michael Cardillo, both Galleon traders, no doubt saw Raj’s gratitude reflected in their salaries and bonuses. I received nothing because, unlike those individuals, I was never one of Raj’s insiders.
Gary explained this definition to the jury, highlighting the fact that not only had I made no money, I’d lost $10 million. He also pointed out that during the time in which the alleged incidents occurred, Rajaratnam was a respected figure on Wall Street and a highly valued customer at Goldman, with multiple relationships at the bank who could have been his “inside sources”—a point that would be crucial to our defense strategy. And he gave a brief sketch of my life history and career. The prosecution was presenting a “cropped picture” of me, he argued, that he intended to correct. However, with Rakoff’s restrictions, he was barely able to expand the frame even a little.
As Gary’s remarks drew to a close, I felt a little more hopeful. He was convincing, and although opening statements are not considered evidence, they provide critical framing. Perhaps we could indeed shake the “frail edifice” of the government case, as Gary described it. Perhaps the truth would prevail. “Rajat Gupta is not afraid of the truth!” Gary declared to the jury. “We are only afraid of confusion and misunderstanding.” Unfortunately, confusion and misunderstanding would turn out to be at the heart of the government’s strategy.
The next morning, they called their first witness: Caryn Eisenberg, Rajaratnam’s executive assistant. She took the stand clutching a red notebook, which she told the jury was where she had kept her list of her boss’s most important callers. He had given her several names, she said, and instructed her that if any of these people called, she was to interrupt him, no matter what he was doing. My name was on the list, along with two names that would be familiar to anyone who had followed Rajaratnam’s trial: Anil Kumar and Rajiv Goel. Also named were my NSR cofounder Parag Saxena and a hedge fund investor, Stanley Druckenmiller.
It was a good story, the red notebook with the secret VIP list. I could see how it must look to the jury. I made a mental note to talk to my lawyers about contextualizing this detail during my testimony, wondering how I could do so without sounding self-important. It was yet another of those simple facts that could be made to look suspicious but was quite ordinary in my life. I was probably on dozens of such lists—I was a very busy, influential, and connected person, and taking my calls would have been a priority for many of my business associates and colleagues. But the jury wouldn’t know this—to them it no doubt sounded highly conspiratorial. The list also served to imply guilt by assoc
iation. Kumar and Goel had pleaded guilty to insider trading, and there was my name alongside theirs in the red notebook.
Unsurprisingly, in questioning Eisenberg, the prosecutor zeroed in on September 23, 2008, the day of the Buffett investment. It was another good story—the call Eisenberg said she received right before close of markets from someone on the list needing to urgently speak to her boss. Strangely, despite the shortness of the list, she wasn’t able to positively identify the caller, but she’d clearly been coached to say the right things to imply it was me. My lawyers objected numerous times to the leading questions from the prosecutor, but most of her testimony was allowed to stand, including the observation that after getting off the phone and instructing one of his traders to buy Goldman, Rajaratnam was “smiling more.”
During cross-examination, David Frankel, one of my legal team, was able to highlight some inconsistencies in Eisenberg’s story. We knew from seeing transcripts of interviews she had done with Rajaratnam’s lawyers before his trial that her story had changed quite a few times. Her memory of September 23 and 24, 2008, had not always been as clear as she was now claiming that it was—for example, she’d originally claimed that she arrived in the office early on the 24th and everyone was gossiping about the Buffett deal, but later, after her memory was jogged, she said she’d come in late after a doctor’s appointment. David also focused on a remark she’d made indicating that sometimes when I called, Rajaratnam told her to pretend he wasn’t available and even “snuck out of the building” to avoid me. An instant message conversation between Eisenberg and another of Rajaratnam’s assistants, which we offered in evidence, confirmed this. “Raj made me lie to Gupta. He doesn’t want to see him,” she had written.
This seemed to be at odds with the picture the prosecution was trying to paint, in which Raj waited eagerly for my tips. In reality, I’m sure he often avoided my calls, particularly once the Voyager situation became contentious and he was trying to stall me. Furthermore, I may have been on his VIP list, but I was not one of his trusted inner circle. I was never invited on the special trips he planned for some of his most important business connections, as Eisenberg confirmed during cross-examination. Most importantly, David brought out the fact that Rajaratnam had several close connections at Goldman and that one of those was also on the VIP list: a Goldman account executive named David Loeb.
Mr. X
Loeb had come to our attention a few months earlier, although at first we only knew him as Mr. X. Under US law, the government had been required to share with us all the evidence they had generated during discovery. They did so with a vengeance—dumping a total of 3.2 million pages of documents on us, with no guidance as to what might actually be relevant. As my legal team combed through the mountains of paper, they stumbled upon something potentially critical: evidence that Rajaratnam had an alternative insider at Goldman. The documents seemed to suggest that the government actually had wiretap recordings of this person tipping Rajaratnam about stocks.
When my lawyers told me what they’d found, I felt vindicated. From the beginning, I’d tried to explain that I was not Raj’s only Goldman connection; he had many friends on the inside who could have been feeding him information. What wasn’t clear to us was whether the government even knew what they had on this individual, who we had begun referring to as Mr. X. Why weren’t they pursuing charges against him?
Immediately, we filed a motion demanding that the government provide us with any evidence they possessed that someone at Goldman or P&G was illegally tipping Rajaratnam, about any companies. The Mr. X discussion took center stage at one of the pretrial hearings, with Brodsky claiming that all such evidence was among the papers he’d already given us. Without a name, however, the search was daunting. Eventually Brodsky conceded that he would give us the name, allowing us to search the electronic database of discovery.
We learned Loeb’s identity in February, and sure enough there were actual wiretap recordings of him giving Rajaratnam tips about stocks including Apple and Intel: much stronger evidence than the thin circumstantial case they’d built against me. Why wasn’t it being considered that he could be Raj’s Goldman source? Shortly afterwards, the government announced it was investigating Loeb, along with two other Goldman executives, for insider trading. Would they even have pursued that investigation had we not brought the evidence to their attention? Or were they just intent on pinning the crimes on me, given my higher profile? (As it turned out, Loeb was never charged with any crime. How was this possible, when the evidence was so clear? I couldn’t help but wonder, was it some kind of exchange for Goldman’s testimony against me?)
We intended to call Loeb as a witness, suggesting to the jury that there was a credible alternative source for Rajaratnam’s information. I was glad David had managed to introduce his name into the conversation on day one.
Trial by Boredom
Over the next few days, the prosecution continued to build their dramatic narrative around the Buffett investment. They called a brash young Indian trader, Ananth Muniyappa, who claimed to have been one of those ordered to buy Goldman stock that afternoon in September 2008. They called Byron Trott, the smooth-talking Goldman executive who’d orchestrated the Buffett deal, and had him tell the story of how it came about, in the midst of a climate of “complete chaos and fear,” as he described it. They went to great lengths to establish the high degree of secrecy surrounding the deal, although we had documentation we planned to use that clearly showed Goldman stock beginning to go up the moment the emergency board meeting was announced. It could not have been quite as secret as they were trying to claim.
Despite these attempts to add drama, the government’s case was characterized by a mountain of mind-numbing minutiae. Indeed, it seemed that their strategy was to deliberately overwhelm the jury with detail, often in the form of stacks of documents that were then projected on to the big screen, page after page, while witnesses were asked to read sentences aloud and explain their meaning. An FBI agent explained wiretap protocol in such exhaustive detail that the judge applauded the jury for not having fallen asleep, even though they “had every reason to do so.” A McKinsey IT security manager spent hours testifying about long lists of phone numbers and the names to which each was assigned, until the judge inquired of the prosecutor, “How much more of this are you going to ask the jury to endure?” A Galleon employee was called to comment on the office floor plans. The guy who installed the Galleon swipe card system was asked to describe how it worked. I remember actual file cabinets full of papers being wheeled in on trolleys, jurors’ eyes glazing over as they were subjected to hour upon hour of calendar pages, phone records, emails, and meeting minutes from board meetings that were often unrelated to the incidents that were under consideration. Reporting on the case, New York magazine observed, “If dullness were a crime, the proceedings in courtroom 14B at the Southern District Court on Pearl Street would be a graver offense than the actual matter at hand …”2
These tactics served, over and over again, to muddy and confuse what was in fact quite a simple picture. They gave the impression that the government’s case was exhaustively researched and backed by reams of evidence, when in fact there was very little there. The jurors, none of whom were well-versed in business or finance, looked by turns bemused and bored. They may not have been falling asleep, but how could they possibly be asked to retain and contextualize the volume of detail they were being asked to consider? Even the judge acknowledged that the prosecutor was naive in thinking the jury would be able to “peruse carefully a thousand documents” and requested that he “sharpen up” his presentation. The fear Gary had referenced in his opening, of confusion and misinformation, was looking increasingly justified. Clarity seemed unlikely to prevail in this courtroom.
Adding to my concern were the countless hard-fought legal battles that took place outside of the presence of the jury—before each day’s proceedings began, before and after breaks, after the jury were dismissed in the evenings
, and at numerous sidebars throughout each day. Lawyers conferred over every other question, making progress excruciatingly slow. Sometimes it seemed that more time was spent in colloquy than in examination. Objection after objection was voiced, sustained, or overruled. It was a revelation to me how much of a trial comes down to disputes over what is and is not allowed to be said: what evidence is admitted, which witnesses can be called, what questions can be asked, what form those questions can take, what words may or may not be used. The rules of evidence, I was learning, were very specific, yet there were numerous exceptions that could be invoked. The hearsay rule was particularly tricky, and almost never seemed to go in our favor. All these decisions, made by the judge alone, shape the narrative that the jury hears. I came to believe that many cases must be won or lost at the sidebar.
I wondered how it must appear to the jurors. It certainly bore little resemblance to the courtrooms portrayed in the movies, with lawyers making eloquent speeches and rapid-firing questions at witnesses. I imagined it was like trying to watch a movie being made by two competing directors at the same time. The actors would begin a scene, but every two minutes one or other of the directors would yell “Cut!” and everyone would go off into a huddle on the side. The jurors never saw the material that ended up on the cutting-room floor, nor did they have a script to refer to. They were expected to piece together the narrative from the disjointed collage of half-finished scenes that was presented to them. In their place, I thought, I’d find it near impossible to follow the storyline, much less interpret it accurately.
Each day, as I sat in the courtroom with my lawyers, my wife and four daughters would take their seats behind me. There was only one day when those seats were not filled: on Thursday, May 24, Aditi graduated from HBS. I had been unable to convince the judge to allow me to attend. The day I told her I couldn’t be there, she’d assured me that she would be fine, but I could hear the tears she was holding back as she hurriedly got off the phone. Her empty place, along with her mother’s and Sonu’s, reminded me all day that I was missing what should have been one of my proudest days. I could not help but remember Sonu’s graduation some years earlier—a joyful return to my alma mater, where I was well known and respected among the faculty and students. How would it be today? I wondered. Would Anita, Sonu, and Aditi be subjected to gossip and awkward looks? What were they supposed to say to all the people who knew me and knew why I was absent? I’d asked Aditi once if my legal problems had affected her at school, and she quickly told me no. Only later would I learn that she had been subjected to many humiliations because of my case—articles about me had been left anonymously in her locker, scathing emails were circulated calling for my resignation from the HBS board, and well-meaning professors suggested she take a year or two off until it all died down. She’d even been forced to sit through a class taught by Preet Bharara himself. I didn’t know all this on the day of her graduation, but I had no doubt it must have been excruciating for her and was touched by her courage. I wished I could have been there with her to hold my head high and remind people that I had not been found guilty of any crime.
