Defence attorney Gary Naftalis made the suggestion in Manhattan federal court Monday during cross-examination of Anil Kumar, a former McKinsey partner described as a protege of Gupta's, on his testimony about the relationship between Gupta and Rajaratnam.
The defence also asked Kumar about Gupta's threat to sue Rajaratnam over the losses in the Galleon Voyager Fund as a reason why he wouldn't leak inside information to Galleon hedge fund co-founder in 2008. Kumar said Gupta had invested $10 million in the Voyager Fund in 2008, Rajaratnam invested $40 million, and the two borrowed $300 million from Lehman Brothers Holdings Inc for the fund.
Later, the fund was wiped out in the 2008 stock market collapse, angering Gupta and prompting him to consider filing a lawsuit because of what he said was Rajaratnam's mismanagement of the fund, Kumar said.
Gupta later showed up at Kumar's apartment in February or March 2009, Kumar said after learning Rajaratnam had withdrawn money from the fund without Gupta's consent or knowledge.
"He said he'd discovered something that was quite distressing," Kumar testified.
"Rajaratnam had removed some of the money for the fund for himself," Kumar said, adding, "Gupta said 'This is plain wrong, this is worse than not managing the money well, it's taking money out.'"
Prosecutors said that the litigation threat didn't come up until 2009, which was after Gupta allegedly provided illegal tips to Rajaratnam as late as Jan 29, 2009.
Kumar also testified that Gupta hadn't been invited to Rajaratnam's birthday party in Kenya in 2007.
Later Goldman's chief executive Lloyd Blankfein testified that board discussions were supposed to be kept secret.
Gupta is accused of passing confidential information to Rajaratnam about Goldman's first quarter 2007 earnings, a $5 billion investment in the bank by Warren Buffett in September 2008 and an October 2008 earnings' warning.