Foundation, Your Honor! No, Relevance! Finding Objection in Day 3 of U.S. v. Gupta

Frequent objections broke the rhythm of Day 3 of the insider trading trial of Rajat Gupta, the former McKinsey & Co. chief executive officer accused of passing sensitive information to hedge fund manager Raj Rajaratnam. Defense counsel  interrupted the prosecution’s questioning of former Galleon Group trader Ananth Muniyappa. Prosecutor’s returned the favor on cross examination.

Would any real business get done, we wondered? It would, but first a taste of what passes for courtroom drama:

“What does it mean to raise $2.5 billion in a common stock offering?” assistant U.S. Attorney Richard Tarlowe asked Mr. Muniyappa.

“Objection.” Whether it was Mr. Gupta’s lead lawyer Gary Naftalis or co-counsel David Frankel, we couldn’t quite tell.

“What is your understanding of what it means to raise $2.5 billion in a common stock offering?” Mr. Tarlowe reworded.


“Do you know how a stock offering works?” Mr. Tarlowe attempted.

“Yes,” said the witness

“How do you know?”

Defense counsel: “Objection.”

At one point, Judge Jed Rakoff lost track. “Was that objection on foundation or relevance?” he asked. “Foundation and relevance,” defense counsel replied.

“And whatever else we can think of,” Mr. Naftalis quipped.

After more of the same, and a pair of lengthy sidebars, prosecutors succeeded on getting an e-mail exchange between two Galleon co-founder Gary Rosenbach and trader Leon Shaulov published on the courtroom’s large projection screen.

Some background: Yesterday, former Galleon assistant Caryn Eisenberg testified that Mr. Gupta called Mr. Rajaratnam at 3:54 p.m. on Sept. 23, 2008; in the minutes that followed, Mr. Muniyappa said, he and another trader bought more than 267,000 shares of Goldman Sachs stock; after markets closed that day, Warren Buffett announced he’d invested $5 billion in Goldman.

Prosecutors say Mr. Rajaratnam made more than $1 million on the trade, and that he acted on a tip from Mr. Gupta, who was a Goldman director at the time. They also say that Mr. Shaulov was short financial services stocks, and was a more than a little displeased that he hadn’t shared in the inside information.

“Thx for the head up btw,” Mr. Shaulov e-mailed Mr. Rosenbach. “I’m short 170mm fins. Not one word from anyone. Thnku very much. All I get is sick dilution 0 help 0.”

Also: “What I give vs. what I get back is disgusting,” Mr. Shaulov wrote. And: “Fucking bullshit.”

Mr. Tarlowe sought to clarify for jurors who might not be up on such advanced financial industry jargon. “If you’re short financial stocks, would you benefit from stocks going up or down?”

“Objection,” cried the defense.

While we’re on the subject, we’d be remiss not to note that Mr. Muniyappa wore jeans and an untucked plaid button down, prompting New York Times legal eagle Peter Lattman to poll observers on the last time they’d seen a witness take the stand without a necktie.

“Maybe not at the trials The Times covers,” a wiseacre snapped.

[Credit: World Economic Forum/Michael Wuertenberg]

Foundation, Your Honor! No, Relevance! Finding Objection in Day 3 of U.S. v. Gupta