While serving on Goldman Sachs Group Inc. board in 2008, Rajat Gupta told Raj Rajaratnam of talks about whether to buy Wachovia Corp. or American International Group Inc., according to a wiretap recording.
Prosecutors at the insider-trading trial of Rajaratnam, the co-founder of the Galleon Group LLC hedge fund, on Monday played the recording of a July 29, 2008, discussion between the men. During the conversation, Rajaratnam asked about a "rumor that Goldman might look to buy a commercial bank."
"Yeah, this was a big discussion at the board meeting," Gupta replied, adding the board was "divided." Gupta told Rajaratnam that among the institutions the Goldman Sachs board discussed were Charlotte, N.C.-based Wachovia, now part of Wells Fargo & Co., and New York-based insurer AIG, according to the transcript.
Prosecutors have told jurors that Gupta, 62, was a "co-conspirator" with Rajaratnam, alleging he tipped the hedge fund manager about Goldman Sachs's transactions, including the 2008 investment in the bank by Warren Buffett's Berkshire Hathaway Inc. Gupta isn't charged with a crime and has denied wrongdoing. Anne Granfield, his spokeswoman, declined to comment.
The recording was the first tape played in which Gupta was a participant in the conversation. The exchange was one of about 170 wiretaps the government said it will present to jurors in Manhattan federal court. Rajaratnam, 53, is the central figure in the largest crackdown on hedge-fund insider trading in U.S. history. He is accused of making $45 million from confidential information leaked by corporate insiders and hedge fund traders.
The Galleon Group case has led to a nationwide investigation implicating banks, consultants, technology companies and other hedge funds.
Former McKinsey & Co. partner Anil Kumar, a government witness, described Rajaratnam's relationship with Gupta, McKinsey's former worldwide director. Before prosecutors played the tape, Kumar said Gupta had invested or planned to invest in several Galleon Group funds.
In the taped conversation, Gupta takes Rajaratnam through a portion of a recent Goldman Sachs board meeting, calling his colleagues "an opportunistic group."
"We aren't having trouble funding ourselves but, you know we should explore more global sources of funding," Gupta quoted board members as saying. "It's quite conceivable they'd come and say 'Let's go buy Wachovia,'" Gupta said, "Or even AIG."
The board's view was "very bearish" on buying a bank, Gupta told Rajaratnam. "I would be extremely surprised if there was anything imminent."Goldman Sachs never bought Wachovia or AIG, and no evidence was presented that Rajaratnam traded on Gupta's disclosure about the board's discussions.
Ed Canaday, a spokesman for New York-based Goldman Sachs, Mark Herr, a spokesman for AIG, and Mary Eshet, a spokeswoman for San Francisco-based Wells Fargo, declined to comment.
Kumar testified Gupta invested in a Galleon fund and told him he'd lost $10 million when it failed in 2008.
Gupta was also in talks to become the chairman of a Galleon fund known as Galleon International, Kumar said.
Rajaratnam told Kumar that Gupta "gives a little bit of cachet in South Asia and globally," according to the May 28, 2008, recorded call played for the jury. "He wanted to be chairman of Galleon International, and that's fine, you know."
Kumar replied he was surprised Gupta was willing to serve, noting he was also on the boards of American Airlines Inc. and Procter & Gamble Co.
"It's now reached a point where it's physically and humanly impossible to do the things he's doing, right?" Kumar said, according to the recording.
The jury heard a tape of a July 29, 2009, telephone call in which Rajaratnam complained to Gupta about Kumar.
"You know I'm giving him a million dollars a year for doing literally nothing," Rajaratnam said on the tape.
"Kumar wants to "be a mini-Rajat" without "bringing anything to the party," Rajaratnam told Gupta.
