Part One: Rajat Gupta Trial: The Jury is Wrong
Previous posts about the Rajat Gupta trial:
1. The Real Crime of Rajat Gupta
2.The Other Goldman Insider Ring
3. Three Show Trials In Search Of A Crime
4. If Rajat Gupta Deserves To Be Jailed, Then
5.The Problem With The Rajat Gupta Insider Trading Case
6. The Scape-Goating Of Rajat Gupta
7.Former McKinsey CEO Gupta Faces Possible Hundred Years In Prison
Previous posts about Rajat Gupta:
PROBLEM IV: NO MOTIVATION
The next problem is with the motivation in the case. There isn’t evidence of any.
Rajat Gupta has already climbed as high as anyone can climb in corporate America. He was paid a million bucks for a few weeks work on the Goldman board, one of many on which he sat. His net worth is over $80 $130 million. He has held some of the most prestigious positions in corporate America, and has the ear of some of the richest and most powerful men in the world, from Bill Gates to Bill Clinton, from Mukesh Ambani to Manmohan Singh.
Why would he destroy all that for Rajaratnam, a hedge-fund operator whom he didn’t know all that well? Gupta might not be as rich as Rajaratnam but he had plenty of access to money-making opportunities.
Besides, nobody who knows him thinks he was either greedy, ostentatious, or envious. He led a relatively humble life, socializing mostly with other Indians, and eschewing the trappings of Wall Street. He wasn’t in debt, he had no money problems that we know of so far, and he had four daughters, whose lives would be badly affected by any kind of wrong-doing.
He was deeply involved in educational work, from all accounts quite sincerely and effectively.
What’s more, he’d actually announced his departure from Goldman Sachs earlier in the same month in which he’s supposed to have tipped Rajaratnam off on the Buffet investment (September 23, 2008)
It was only because Lloyd Blankfein had asked him to stay, to overcome any perception of instability his departure might have caused the firm, that he’d stayed on.
In the context, Blankfein’s request should be tagged as odd. It needs to be researched some more. Was Blankfein setting him up in some way? I’ll explain later in this piece, why that question needs to be raised.
What about the calls to Rajaratnam, which someone have called very deferential. They hint that the calls show he wanted to please Big Raj.
I listened to them and I honestly didn’t get that. I got a degree of insecurity, but not of deference. Gupta didn’t know the Wall Street world of private equity and hedge-funds. It was new to him and he knew he didn’t know. His voice sounds cautious and insecure, not deferential.
The caution is what makes me think it’s unlikely he knowingly participated in insider-trading. The insecurity is something a seasoned manipulator like Raj Rajaratnam would have spotted immediately.
Raj knew how to hone in on weak spots. It’s a mark of conmen and sociopaths of all kinds. And indisputably, you have to have a streak of both to manipulate people to the extent Big Raj seems to have.
There’s another even more simple explanation for the deference.
Galleon was an important client of Goldman’s. Goldman had a habit of makings marks of its clients. Gupta might have needed to reassure the shrewd Rajaratnam about that.
Raj had also donated to a pet philanthropy of Gupta’s, The American India Foundation, at a time when no one else would. Gratitude for that and a certain ethnic solidarity would have also played a part.
Remember, Gupta is a man who didn’t socialize with his white counterparts. He was more comfortable in kurta-pajamas and Hawaiian chappals than teeing off on golf courses.
He made it in the corporate world solely on his smarts. No one denies he was extremely brilliant.
Gupta was also involved with a private equity firm with Rajaratnam, New Silk Route, focusing on Asia. NSR was set up by a Goldman associate, Mark Schwartz, who left Goldman to manage a Soros fund.
Put another sticky note on that one. It needs to be explored a bit more, because Soros is alleged to be a part of the Goldman-hedge-fund mafia, fingered by Patrick Byrne, CEO of Overstock, and sometime protege of Warren Buffet.
It’s the Buffet deal that Gupta is alleged to have leaked to Rajaratnam, seconds before closing, according to the Feds.
This same Mark Schwartz, an Asia specialist, has just returned to Goldman. There may be nothing odd in all this. But it’s curious.
It’s also curious that all the people involved in the NSR, including Rajaratnam, have been fined or otherwise penalized by the government. Except Mark Schwartz.
I’ll return to this angle later, but for now, I’m just trying to show that there were many reasons for Gupta to be in touch with Rajaratnam.
These reasons, and not “envy,” are probably why Gupta was calling Rajaratnam.
But it was the meme “envy” which the press repeated over and over.
Why?
Once more, Rajaratnam is the sole source.
It was he who suggested that Gupta was suffering from “billionaire envy” in tapes that surfaced during the Galleon trial, which lasted a couple of months (March-April, 2011).
Again, relying on the word of a man convicted of multiple counts of securities frauds, who made a living out of manipulating his tipsters and his targets, is not smart. He probably knew how to manipulate the media too.
Raj’s checkered past included fines as well as suspected ties to charitable organizations some call fronts for the terrorist Tamil Tigers. That means he would have been vulnerable to pressure from the government to say what they wanted him to say.
He could even have been roped into some kind of covert operation with him.
US policy in that region, strongly anti-Tamil Tiger until about 2006, changed – at a covert level -to being pro-Tiger. That’s how Bruce Fein explains it, anyway.
A senior lobbyist and legal advisor to the Ron Paul campaign, Fein is a neo-con, whom FBI whistle-blower Sibyl Edmonds has fingered as tied to money-laundering for terrorist groups.
2006- 2007 is the time when a lot of surveillance and psyops got underway – including, we now know, intellipedia, wikileaks (tied in to Soros in multiple ways); and the Stuxnet worm (which I tagged on this blog as a government operation, a while back).
The reason these ops went into effect was probably the world-wide discrediting of the US media over the Iraq war. There had to be a new, more covert way to influence public opinion to support war. There had to be a new way to co-opt the opposition.
There had to be a new way, really, to wage war.
There was. The new war-making was through social media, through professional hacking (Anonymous), mass-leaking/hacking (wikileaks), nternet psyops.
The new war was conducted through the law and the courts (human rights abuses), illegal and collusive short-selling, international tribunals, NGOs and “color” revolutions, all meant to destrabilize countries.
We can see examples of the new war-making from Tahrir Square the Anna Hazare movement to Occupy Wall Street. This is managed revolution, the other face of managed capitalism.
The globalists have already deployed the “color” revolutions against the Muslim world, Stuxnet against Iran, and naked-shorting against American firms; they are now deploying Trojan horse NGO’s, wikileaks and the legal system against India. Indian business men have become the patsy for the globalists.
So it’s not inconceivable that Rajaratanam, parallel to this transformation of the Tamil Tigers from bad guys to good guys, got roped in to playing a role in some kind of government sting, either willingly, or under pressure.
The Tamil Tiger transformation corresponds to the time in which the globalists, having got a foot into the lucrative Indian market (Rajat Gupta’s career is inextricably entwined with this phase), now move on to the next phase – undermining the country to create a more secure foothold for their own interests.
This dual strategy of building up (through the business world) and tearing down (through Dalit secession movements, pro-Tamil Tiger advocacy, human rights activism (liberventionism), trojan horse NGOs and missionaries) can be seen very clearly in Tamil Nadu. There, Chief Minister Jayalalitha has bent over backwards for corporations, western NGOs and missionaries, at the expense of the needs of the local population, the equitable interests of Hindu temples and social organizations, all with the willing help of the very leftist Indian English language media.
Back to my story.
Rajaratnam could very well have cut a deal or even be used in some kind of frame-up, to get a better deal for himself from the prosecutors. His eleven year sentence (much less than he could have got) has been put down to his bad health, but he could have cut a deal to drop or cover up other evidence against him.
Such things aren’t exactly unheard of.
He says he didn’t. He says he could have but he chose not to implicate Gupta.
Has anyone ever heard of such a fine way to cover for a fellow conspirator, by announcing in the international press that you are covering up for him?
Raj, a guy who swindled Gupta of his $10 million and then jeered about it on tape to another person, is really Jesus Christ taking the rap for someone else?
Raj was part of Wall Street. He had tipsters all over the place, even a blonde bombshell who seduced managers at firms to get them to reveal confidential information. He claimed he didn’t know where the line between zealous research and insider-trading really lay.
Oh really.
Again, his words don’t sound credible.
Yet it looks like he got very sympathetic coverage in the New York press, far more sympathetic than Gupta has got so far. Maybe this has to do with his charity work. But Gupta’s done that too. Maybe it’s all the money he put into the Democrat party. But Gupta’s done that too.
I suspect it has more to do with his running Galleon, a huge hedge-fund, where, if we take David Loeb at this wire-tapped word, the tipsters were passing tips to other people on the Street, as well.
Which other people?
Were they, like Galleon, other friends/clients of Goldman? Did they include anyone from that short-seller circle that include Daniel Loeb, Jim Chanos, and even George Soros?
Hedge-funds, it’s been documented, heavily influence some of the most prominent financial and news magazines, including Fortune and Barron’s. They have strong ties to financial writers across the board. Many of those writers exchange information and money with each other. This too has been documented.
The writers make their names, the short-sellers make money by targeting firms.
It can end up being a form of racketeering.
The evidence shows that poor dear Goldman Sachs, victim in this case, is one of the most prominent banks colluding with hedge-funds and writers in attacking companies they consider commercial rivals.
Gupta, associated with both McKinsey and indirecrtly, via McKinsey, with Enron is thus a perfect target, rich in symbolism and highly visible, for the short-seller- bank mafia, whose kingpin is Goldman Sachs.
The masses (egged on by leftist bloggers and writers think they are attacking Goldman Sachs in taking down Gupta. Instead, they are doing Goldman’s job for it.
Or maybe they are all, mob and expert class both, simply stupid.
Goldman needs a patsy. It’s not going to be Blankfein or Paulson.
Rajaratnam, with extensive ties among the hedge-funds, probably knows the dirt on a few big fish on Wall Street and he might have been able to cut some kind of deal to let them off the hook and substitute a convenient patsy instead.
Managers are not the biggest honchos on Wall Street, although they attract the anger of the masses the most. Hedge-funds are, and an ambitious prosecutor from New York might prefer to target low-hanging fruit rather than ruthless billionaires.
Gupta, as Raj shrewdly guessed, was not a “big boy.” He was a dolphin, swimming not with tunas, as his friends have claimed, but with sharks.
PROBLEM 5: SUSPICIOUS MEDIA FRAMING
Rajaratnam makes his claim about Gupta’s envy in a noticeably sympathetic article penned by Suketu Mehta, the Bengali born author of Maximum City, and one of the brightest lights in the desi community in India.
Mehta is a writer whose career has been built on writing what the Western media establishment (largely on the left) would like to hear.
Whether he consciously tailors his opinions is beside the point. His opinion are the opinions of those among whom he makes his livelihood.
In his best-known book, “Maximum City,” a brilliant book about urban Bombay, Mehta used a certain Bombay film-maker to get an inside view of the industry, and then, trashes him. That should tell you about what Mr. Mehta might or might not be capable of in pursuit of his career.
In the interview with Rajaratnam, Mehta blames Gupta’s alleged misdeeds on the fact that Indian-Americans care too much about money.
I guess it would take an Indian who left India in his teens, has the luxury of living in New York and making writing his main profession (you couldn’t make a living writing in India) to lecture Indians on the importance of money.
Not caring about money is a luxury that only those who enjoy the benefits conferred by industrial production, government welfare, as well as the booty of empire, can afford to lecture anyone else about.
In India, if you do not care about money, you will not survive. You certainly won’t make enough to buy a plane ticket to come over to New York, go through elite schools, and then jet around in search for stories. You would be suffocating on a bus, working 6 days weeks, without a/c in 45 DEGREE CELSIUS heat in a taxing job, made unendurable because of 8 hour a day electricity cuts caused by the huge demand placed on the infrastructure by factories.
You would care a great deal about money, because you would need lots and lots of it to access clean water, sewage, internet, AC, cars, and all the other luxuries available even to poor people who’ve had the great good fortune to live in the US or move here. Would Gupta prefer that Indian Americans care less about money? Would they then have had anything left over to donate to, say, the Asian tsunami victims?
I wonder what Mr. Mehta did for them by the way? We know what Mr. Gupta did.
But his column has its propaganda use.
All the young Indians hoping to make a literary career in the West will take their cue from it. So will Indian opinion-makers, anxious to seem self-critical, socially aware, and au-courant with the latest thinking in the West.
Thus the English language media in India too becomes an echo chamber of the West.
This sedulous credulity is terrific for the empire because it means the target population need not even be brainwashed. They’ll do that themselves.
Behind Mehta’s little trope of envy, though, the truth is very different.
The truth is that few of Gupta’s legions of friends and associates over years think the man was greedy or even ostentatious or envious.
The only negative description of him that surfaces in the press is that he was greedy for the limelight (Sukutu Mehta of course isn’t), but this too comes from unnamed sources, so how do we know they weren’t simply made up by a rival?
The quote could even be part of some kind of media psyop.
Why someone might wonder do I ascribe such weight to what might just be a casual comment on Mehta’s part?
Because the major themes floated in the mainstream outlets are never casual. They are ALWAYS tailored to fit US state interests.
I’ve shown before how one such meme, “green shoots,” was used with tremendous effect on the economy and on policy making in 2009. My 2005 books, “Language of Empire,” explores the breadth and depth of such media operations.
The “envy of the richer” is one such meme.
A Google search shows the meme was first floated in an April 27 2011 article in the Wealth report of the Wall Street Journal, “Why the Rich Envy the Super Rich?
It features Rajat Gupta’s photo and Raj Rajaratnam’s words prominently.
Insider-trading defendant Raj Rajartnam put it well when describing his millionaire pal Rajat Gupta–the former McKinsey CEO and Goldman Sachs Group director (right)–who wanted to swim with the bigger fish like Henry Kravis.
“My analysis of the situation is, he’s enamored with Kravis, and I think he wants to be in that circle,” Rajartnam said in a conversation picked up by federal wiretaps. “That’s a billionaire circle, right? Goldman is like the hundreds of millions circle, right?
The article, by Robert Frank, notes correctly that CEO’s are the poor boys on Wall Street, making millions, where their counterparts in the hedge-fund world pull in billions.
Frank doesn’t mention the more important point of all this. CEO’s have obligations and duties and restrictions imposed on them to a far greater degree than hedge-funds. Yet, hedge-fund managers, in bed with many financial journalists, rarely come under media fire or scrutiny in the way managers do.
The meme reappears in October 28-30 2011, via the left antiwar site Counterpunch, for which I have also written, in a fine article by Rob Urie, which I linked at the time, and with which I thoroughly agree. None of my analysis is meant to suggest that Urie has anything to do with all of this.
The point of the meme is to counter the popular argument often made in libertarian circles that socialism is driven by envy. It redirects the accusation against the rich themselves.
VI JUDGE RAKOFF ADMITTED HEARSAY AS EVIDENCE AGAINST GUPTA
Loeb, as I said, was not the only tipster at Goldman Sachs. There was also a technology analyst, Henry King and another tipster identified only as Mr. X.
A fourth leaker has also popped out of the woodwork recently.
But Judge Rakoff thinks none of the tapes of Loeb’s leaks, and presumably of the others, are worth hearing.
But it’s not the defense’s case but the whole prosecution case that rests on hearsay, as Reuters blogger, Alison Frankel, argues cogently:
Kramer Levin first of all asserts that Rakoff cannot rule on the admissibility of the crucial Rajaratnam tapes until the government has established by a preponderance of evidence at trial that Gupta is part of the insider-trading conspiracy. That’s been the rule in the 2nd Circuit for more than 40 years, according to the brief. “The government seeks to dispense with the inconvenience of a trial – and Mr. Gupta’s testing of its trial evidence – by asking the court to admit alleged co-conspirator statements before trial, with virtually no evidence in hand, based largely (or perhaps even entirely) on bald statements in its brief that are unproven and, in many instances, unprovable,” Gupta’s lawyers wrote. “Worse, the government seeks to apply that truncated procedure with respect to out-of-court statements it believes are central to the case. The government cites no case in which any court in this circuit has departed from long-settled practice to proceed in that fashion.”
The brief goes on to analyze why the taped conversations between Rajaratnam and Galleon trader Ian Horowitz and Galleon Asia chief David Lau aren’t admissible because they don’t implicate Gupta in a conspiracy. In two conversations with Horowitz on the morning after the Goldman board was informed that Berkshire Hathaway was investing $5 billion in the bank in September 2008, Rajaratnam made elliptical references to “something good” he had learned about Goldman that led him to snap up some 200,000 shares of the bank in the final minutes of trading the previous day. Prosecutors allege that the “something good” was early news of the Berkshire investment, passed along by Gupta (as per phone records) immediately after the Goldman board learned of the capital infusion. And in a call the next month with Lau, Gupta said he’d “heard yesterday from someone who’s on the board of Goldman Sachs” that Goldman’s earnings would be drastically lower than analysts expected. Prosecutors assert the tip came from Gupta, and Rajaratnam dumped 150,000 shares of Goldman after receiving it.
But according to Gupta’s lawyers, to bring in the tapes under the hearsay exception for conspiracy, prosecutors have to show that Gupta knew Horowitz and Lau were part of Rajaratnam’s insider-trading ring and made the wiretapped statement to advance the conspiracy. They assert the government fails to do either. Prosecutors, they argue, can’t even establish that Horowitz, an unindicted co-conspirator in the Gupta case, took part in Rajaratnam’s insider trading on the stocks at issue in the Gupta prosecution, let alone that Gupta had any idea of Horowitz’s involvement with Rajaratnam (whose conduct Gupta claims to be ignorant of). And even if prosecutors can squeak through the gate linking Gupta, Horowitz, and Lau to Rajaratnam’s insider-trading scheme, Kramer Levin’s brief said, they can’t show that Rajaratnam’s statements to Horowitz and Lau furthered the conspiracy.
The Galleon chief’s “vague and generalized statements about ‘something good’” actually suggest that Horowitz wasn’t part of any conspiracy and that Rajaratnam wasn’t tipped about Berkshire, according to Gupta’s lawyers. “It makes no sense that Rajaratnam would use such vague and indefinite words with Horowitz if he had, in fact, received a valuable tip the day before,” the brief said. “Likewise, Rajaratnam’s complete failure in two separate conversations to supply Horowitz with the name of the person from whom he purportedly heard the ‘something good,’ or even some identifying information concerning that person, further confirms that Rajaratnam’s statements were not part of any insider trading conspiracy.”
According to Kramer Levin, the vagueness of the comments to Horowitz also argues against their admission as statements against Rajaratnam’s interest. The hearsay rules assume that when witnesses offer secondhand evidence that incriminates them, that evidence is reliable because it’s a statement against their interest. The government contended that Rajaratnam’s alleged disclosures that he received Goldman Sachs tips are incriminating statements that fall under that hearsay exception. Kramer Levin countered that Rajaratnam didn’t incriminate himself in those inconclusive conversations, and, moreover, the exception for statements against interest only applies when there’s corroborating evidence that the hearsay is trustworthy. Rajaratnam is a known braggart who lied about and exaggerated his access to inside information, Kramer Levin argued. Nothing he said is trustworthy.
The same is true, Gupta argued, of Rajaratnam’s statements to Lau – who’s not even an unindicted co-conspirator. That taped evidence “merely described supposed past events without requesting action by Lau, [so] settled law precludes any finding that they were ‘in furtherance of’ a conspiracy,” the brief asserted.”
VII PROSECTION CASE RELIES ON WORD OF CONVICTED CRIMINALS
Anil Kumar, who chats with Rajaratnam about Gupta’s supposed envy is a convicted criminal, a part of the Galleon conspiracy, and a man who cut a deal with the Feds to wear a wire and turn in Rajaratnam.
He’s a pillar of credibility?
How do we know what kind of a deal the Feds have given him to say what he’s said?
That goes double for Raj Rajaratnam himself. We have only Big Raj’s not very good word that he had a guy on the Goldman and Proctor & Gamble boards leaking to him. Raj could have been boasting and bragging. He obviously had a big ego, what with the in-office massages he paid his employees, the pool-parties with hired gals, and the blonde-bombshells he used to bring down unwary CEO’s.
Raj could also have been playing his tipsters to get more information out of them. Two of them (Chiesi and Kumar) have already said as much under oath.
Raj was a shyster. He cheated Gupta out of his investment of $10 million, the very money the prosecution said was the benefit Gupta received from the tip.
“Do you think he’s a big boy?” he says, while telling Anil Kumar that he had drained the liquidity from Gupta’s investment with him (that is, stolen it). Kumar, another repellent character, was actually Gupta’s protege. He would never have got where he did without his mentor.
8 RAJARATNAM CHEATED GUPTA OUT OF HIS INVESTMENT
So if Gupta got no payment for any information, didn’t trade himself, and didn’t make money indirectly from it, how is it insider trading?
Oh, then the government changed its story and said the tip was made to recover the money that was stolen.
That’s slick. Which is it? Did he tip Raj, with the equity in the Voyager Fund as a payoff, or did he tip Raj in order to get back the equity in the Voyager Fund that was stolen from him? Do you see how amorphous the Fed’s case is?
9. GALLEON CASE IS BEING RETRIED
Even Judge Jed Rakoff admitted that Gupta was being tarred with the Galleon case. But that’s been tried already and Rajaratnam is in the slammer. Why is Gupta being tried for what Rajaratnam did?
10. GOLDMAN CORPORATE CULTURE WAS CORRUPT AND FILLED WITH INSIDER TRADING
Meanwhile, while the government rests its case on circumstantial evidence of the flimsiest sort (trading taking place after quarterly reports and other unheard of events), brings in hearsay, and uses improbable charts that track all Galleon’s gains after alleged tips but none of its losses, the defense isn’t allowed to bring in the considerable evidence that Goldman had tipsters running around all over the place.
Why can’t the defense introduce tapes that go to show that at least two (and possibly four) other Goldman employees were leaking tips to Galleon?
How do we know that Lloyd Blankfein wasn’t leaking the information himself? Just how credible is Lloyd Blankfein, Goldman’s CEO, anyway?
Who buys Blankfein in the role of corporate sphinx?
Not me.
I’ve been watching Goldman Sachs for longer than anyone else in the media.
Goldman has a multi-decade history of corruption and insider-dealing with the government so extensive it’s been called Government Sachs.
Goldman’s entire business model is insider-dealing. That’s what bond trading is, for practical purposes.
And G-Sachs is notorious for treating its customers like marks. Look it up. It’s been fined repeatedly for conflicts of interests between its analysts and it trading desks.
Now Goldman is a model of circumspection?
(TO BE CONTINUED)
