$35 million and counting, Gupta faces financial heat as well in appeals trial

If conviction is overturned, Goldman Sachs will pick up the legal tab for case.

American Bazaar Staff

NEW YORK:  A critical piece of evidence presented at the trial of the former head of Mckinsey, Rajat Gupta, which led eventually to him being convicted of insider trading charges, should never have been admitted in the first place, as it was based on hearsay, argued Gupta’s lawyer at an appeal court here.

That particular piece of evidence is a wiretap which does not feature Gupta, but instead has the incarcerated Galleon hedge fund founder Raj Rajaratnam speaking to one of his portfolio managers, David Lau, about imminent fall of Goldman Sach shares.

Rajaratnam is heard saying on the wiretap that he “heard yesterday from someone who’s on the board of Goldman Sachs,” that the firm will lose $2 a share in the upcoming quarter. That ‘someone’ in the conversation the jury decided in the earlier trial, was Gupta.

Now, Seth Waxman, Gupta’s lawyer wants that piece of wiretap evidence to be excluded from the appeals court, and if that happens, then Gupta need not be proved innocent of insider trading charges, but his conviction would be overturned and he would be eligible for a new trial. However, if the panel of three judges at the appeals trial do not see eye to eye with Waxman’s argument then Gupta, who is out on bail at present, will go to jail to serve his sentence.

Waxman argued that even though the charges of insider trading may stick against Gupta, the particular piece of wiretap evidence against him was the result of Rajaratnam being “a  braggart who lied about his sources to impress his subordinates.”

There is a lot more hanging in the balance for Gupta in the appeal process, with the legal fees now having skyrocketed to a whopping $35 million. According to company bylaws, Goldman Sachs has to pay the legal fees for him as long as the legal tussle goes on, but if he loses the case, and is forced to serve time, the onus of the entire legal fees as well as separate fees of investigation Goldman Sachs did, which run into more than six million dollars, will be on Gupta.

For a man worth reportedly $100 million, it may not mean ruination, but there is speculation as to how much Gupta really is worth now, since the trial started. He has admitted to being cheated of $10 million by Rajaratnam, and was also an avid philanthropist, doling out millions of his dollars away, and with the economy down, his fixed assets, including homes in Westport, CT and in Florida, is worth less.

As the trial drags along, the mounting legal expenses are slowly becoming another noose around Gupta’s head.

To contact the author, e-mail: editor@americanbazaaronline.com

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