A test drive of Rajat Gupta case

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We've suggested recently that for the next 10 weeks all eyes will be on courtroom 17b at the southern end of Manhattan, where Galleon founder Raj Rajaratnam will be fighting to stay out of jail. A lot is riding on that case, as it has implications for so many other insider trading cases.

Lawyers for Rajat Gupta--the disgraced former managing director of McKinsey & Co. who has also been accused of insider trading--will have an extra incentive to monitor every word. Bloomberg suggests Rajaratnam's trial will be a test run so to speak for a potential trial of Gupta, noting they represent flip sides of the same crime.

Recall prosecutors charged Gupta was one of many who fed inside information to Rajaratnam, allowing him to wrack up massive trading profits. "The evidence against Gupta and Rajaratnam includes a tape of a phone call between the two men on July 29, 2008, and phone and trading records showing that Rajaratnam made stock trades immediately after speaking to Gupta," notes Bloomberg.

How will this play out with a jury? We're about to find out. At some point, Gupta will either have to commit to a trial or a settlement. His team will be watching his old friend--they may be estranged now--who just might end up de facto determining Gupta's decision.

Update: Gupta's legal and PR team reminded us that they regard the SEC charges as totally baseless, that Gupta has not been criminally charged, and that they are confident that "these unfounded allegations will be rejected by any fair and impartial fact finder."

For more:
- here's the article

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