New York: A US judge has asked prosecutors to provide specific financial benefits they allege former Goldman Sachs director Rajat Gupta made by passing inside information to his friend Raj Rajaratnam amidst allegations that he also tipped him about Proctor and Gamble's 2008 sale of Folgers Coffee Co to JM Smucker.
The judge's direction came after Gupta's lawyers claimed he made no profits and called the government's allegations "mumbo jumbo".
In a pre-trial hearing in Manhattan federal court in New York on Thursday, Judge Jed Rakoff said he would "encourage" the government to be "more specific" about the financial benefits accrued to Gupta, as alleged in the indictment filed against him in October last year.
The direction came after Gupta's lawyers claimed he made no profits by passing inside information to Raj Rajaratnam.
Rakoff said the prosecutors should "spell them (any financial profits) out with reasonable specificity" in any superseding indictment the government may bring against Gupta in the coming weeks.
During the hearing that lasted for over an hour and which Gupta attended, the government said it is likely to bring slightly revised and expanded charges in a superseding indictment against Gupta by the end of January.
"A final decision has not been made, but more likely than not there will be a superseding indictment," Assistant US Attorney Richard Tarlowe told the judge.
Prosecutors also disclosed during the hearing that apart from passing confidential information about Goldman Sachs and Proctor and Gamble to Rajaratnam, Gupta tipped the Galleon hedge fund founder about P&G's three billion dollar sale of Folgers Coffee Co to JM Smucker in 2008.
The defence wanted to strike out from the indictment the mention of "other company" apart from Goldman Sachs and P&G about which Gupta had passed on information to Rajaratnam.
The prosecutor said there was one other company.
"Gupta disclosed the information about a P&G sale of Folgers Coffee Co to J M Smucker before it was made public," said Tarlowe.
In the indictment filed last year, the government had said Gupta "provided inside information to Rajaratnam because of his friendship and business relationships with Rajaratnam.
"Gupta benefited and hoped to benefit from his friendship and business relationships with Rajaratnam in various ways, some of which were financial".
Calling the government's allegation in the indictment as "mumbo jumbo", Gupta's lawyer Gary Naftalis said his client had not made any profits through his dealings with Rajaratnam, who is currently serving 11 years in prison for running one of the biggest insider trading scams in the country.
"We would like to know what allegations there is other than the vague mumbo jumbo here (in the indictment). What's their theory" Naftalis said.
"What were the financial benefits?... It's a simple question. Our client didn't trade, there was no profit-sharing agreement, there was no kick-back," he said.
Gupta, dressed in a dark blue suit, remained sombre throughout the hearing, exchanging only a few words with his legal team.
He politely declined to make any comments to reporters after the hearing. Naftalis too did not make any comments.
Prosecutors have alleged that Rajaratnam made millions of dollars in profits and avoided massive losses through the inside information Gupta passed on to him which the Indian-American learnt in his capacity as board member of Goldman Sachs and Proctor and Gamble.
The IIT and Harvard educated former McKinsey head is charged with securities fraud and conspiracy to commit securities fraud and faces a maximum prison sentence of up to 105 years if convicted on all charges.
Gupta has pleaded not guilty to the charges and will go on trial on April 9.
Among other crucial information Gupta allegedly passed on to Rajaratnam was the five billion dollar investment in Goldman by Warren Buffett's Berkshire Hathway at the height of the financial crisis in October 2008.
During the hearing Naftalis also asked the prosecutors to identify any other co-conspirators in the case, to which prosecutors said Gupta was the sole source of inside information for any trading done by Rajaratnam.
"We have no evidence whatsoever that anyone other than Gupta tipped Rajaratnam," Assistant US Attorney Reed Brodsky said.
Gupta's lawyers had also asked Rakoff to suppress the wire tap recordings from being heard by a jury, a request the judge said the defendant should "not be too optimistic" about being granted.
Gupta's lawyers are expected to base their arguments at the trial on the fact that Gupta himself did not trade in any securities, did not tip Rajaratnam so he could trade, and did not share in any profits as part of any quid pro quo.
Prosecutors will also have to prove that Gupta provided inside information about Goldman Sachs to Rajaratnam expecting him to trade on it and received a benefit in return.