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Prison Puts A Damper On Once Friendly Working Relationship

The Times reports that the friction between Raj Rajaratnam and Rajat Gupta around the Federal Medical Center Devens is more than a little palpable.
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Time was, hedge fund manager Raj Rajaratnam and McKinsey director Rajat Gupta were great pals. Maybe not the kind that asked each other to serve as godfathers to their children, but certainly the kind that could be dubbed "Work BFFs." The sort that would IM each other Monday morning to chat about what they'd gotten into that weekend, play in the same fantasy football league, and pass on inside information obtained during confidential board meetings from which the other could profit. And while onlookers to the bosom buddies might've hoped their bond could survive both men being convicted on securities fraud chargers and sent to a prison where inmates are sent to solitary confinement for being caught with an extra pillow, the Times reports that, shockingly, such is not the case.

Friends, a former inmate and those who have interacted extensively with the two men describe what has become an awkward relationship. The two lead parallel lives that sometimes intersect. They occasionally run into each other in the common areas at Devens and exchange pleasantries. Although both men are in prison for the same crime, their friendship is irrevocably broken.

It's upsetting to say the least, but is there any glimmer of hope? A small chance that one day, in the near future, the two could bury the hatchet and team up to work the prison system like they worked Goldman Sachs? Not bloody likely. Especially considering Gupta has been seen running around with a replacement Raj.

Before his recent transfer to the main compound, Mr. Gupta reported daily at 5:30 a.m. to the cafeteria, where he washed tables. He liked to take a brisk five-mile walk before the 8:40 a.m. inmate count, Mr. Morgan said. After dinner at 4 p.m., the two walked and talked. “Those conversations were priceless,” Mr. Morgan said. “Where would I ever meet a guy like Rajat?” The two men played handball and racquetball and were champion bridge partners. “He is the most competitive man. Don’t let anyone tell you differently,” Mr. Morgan said. “When we played cards together, we won. Whatever he does, he played to win.” In the summer on Thursdays, the two split a pint of ice cream from the commissary.

Obviously things are already strained between Gupta and Rajaratnam as is but Gupta just better pray none of those pints were Coffee, Coffee, Buzz Buzz or it'll be on.

Onetime Allies on Wall Street Have Uneasy Prison Reunion After Insider Trading Trials [Dealbook]


Rajat Gupta Defense Team: You Think Our Client Would Pass Inside Information To A Guy Who Didn't Even Have The Decency To Invite Him To His Birthday Party?

What motivates people to share material non-public information with a person they know will use it for profit? For some, it's simply about greed. For others, it's about the thrill. For yet others, it's about pillow talk. For Rajat Gupta, the McKinsey director currently on trial for allegedly passing inside information to Raj Rajaratnam, it's about friendship, according to prosecutors who are trying to make the case that Raj and Rajat were the best of buds and that's what buds do. They they back each other up when they drunkenly hit on the girlfriend of the wrong guy at the bar, they stand up as best men at each others' weddings, they pick up the phone and say "Buy GS" when they know for a fact Warren Buffett is about to do so, too. And although attorneys representing Gupta don't deny the two were thick as thieves, they argue that while perhaps back in the day Rajat would have provided useful information to Raj, there is no way he would have done so after Big R twice violated the bonds of friendship. In the first instance, there was this: Defense attorneys have argued that Messrs. Gupta and Rajaratnam had a falling out in fall 2008 after Mr. Gupta lost his entire $10 million investment in a fund managed by Mr. Rajaratnam and therefore wouldn't have passed along inside information...The precise timing of their relationship's deterioration could be crucial in proving Mr. Gupta's guilt or raising doubts in the minds of jurors about whether he conspired to commit securities fraud...Defense attorneys have said Mr. Gupta was furious at Mr. Rajaratnam in the fall of 2008, when Mr. Gupta's $10 million investment in a fund called Voyager Capital Partners Ltd. evaporated. According to Mr. Kumar's testimony, Mr. Gupta felt Mr. Rajaratnam's negligence had allowed Voyager to collapse. And then this happened:

The Universe Has Good News And Less Good News For Rajat Gupta

The less good news is that a jury found the former McKinsey executive guilty on three counts of securities fraud and one count of conspiracy for passing material non-public information to his friend*, convicted insider trader Raj Rajaratnam. The good news: 1. Rajat could go to jail for twenty years but probably won't ("Gupta faces up to 20 years in prison on each of the fraud charges and up to five years for the conspiracy charge. But his sentence is likely to be significantly lower under federal guidelines.") 2. Sentencing is scheduled for October 18 so he's got the whole summer and then some into a Zen place about going to prison. Also! Plenty of time to do all those things he was too busy for when he was working. This is gonna be his time. Time to taste the fruits and let the juices drip down his chin. The summer of Rajat! Gupta Found Guilty Of Insider Trading [WSJ] *Friend Rajat's ass.

Rajat Gupta Appealing Suggestion Passing Material Non-Public Info To Hedge Fund Manager Friend Was "Insider Trading"

It's a dirty, dirty phrase and one Gupta says doesn't apply to him; he's waiting for others to get on board.

Judge Throws A Wrench In Rajat Legal Team's 'You've Got The Wrong Guy' Defense

Over the course of the Rajat Gupta insider trading trial, attorneys for the former Goldman Sachs director have attempted to show that while their client was privy to material non-public information about, among others, Goldman and Procter & Gamble, and had an established relationship with Raj Rajaratnam, the hedge fund manager currently doing eleven years for trading on material non-public information, their client had no role in helping Raj-Raj score his ill-gotten gains. Last Monday the defense put a witness on the stand who told the jury that while once close, Gupta wasn't even invited to Rajaratnam's "lavish 50th birthday party that took place in Kenya," ergo there is no way Rajat would've shared inside info with the guy. This week, the team was hoping to play wiretaps of conversations that took place between Rajaratnam and Goldman executive David Loeb, who they claim is the guy who actually tipped off the Galleon manager. Unfortunately: Rajat Gupta, the former Goldman Sachs Group director accused of insider trading, lost a bid to have a jury hear wiretaps of Goldman Sachs executive David Loeb tipping Galleon Group LLC co-founder Raj Rajaratnam...Rajaratnam got some of his illegal tips from Loeb, Goldman Sachs’s head of Asia equity sales in New York, defense attorney Gary Naftalis has said in court. The lawyer has argued to the jury that the “wrong man” is on trial...“This is an attempt to prove an alternative view of the underlying facts and blatant hearsay,” Judge Rakoff told Gupta’s lawyers. Gupta Loses Bid on Wiretaps of Goldman’s Loeb, Rajaratnam [Bloomberg] Related: Maybe Rajat Gupta Just Wanted Raj Rajaratnam To Console Him Over Goldman’s 3Q2008 Loss, Not Go And Trade On It

Rajat Gupta's Lawyers May Try The "Everybody Was Doing It" Defense

There is much to like in this morning's Journal article about the Rajat Gupta insider trading prosecution, including a nice illustration of how the inside information that Gupta allegedly passed to Raj Rajaratnam actually seems to have been out in the market already. But let's start with the transcript of the call between Raj Rajaratnam and his trader Ian Horowitz, which the Journal has redacted not for confidentiality but for saltiness: Just so you can see Raj Rajaratnam saying "fuck" a lot, the full transcript of that call is here. But, anyway, the Journal story: