Ex-Goldman director Gupta loses wiretap ruling

Former McKinsey chief and ex-Goldman Sachs director Rajat Gupta (C) exits the Manhattan Federal Court after attending a pre-trial hearing on insider-trading charges in New York January 5, 2012.

REUTERS - Former Goldman Sachs Group Inc (GS.N) d irector Rajat Gupta lost his bid to suppress wiretap evidence from his upcoming criminal insider-trading trial on charges that he leaked boardroom secrets to hedge fund founder Raj Rajaratnam.

U.S. District Judge Jed Rakoff in Manhattan issued his ruling on Tuesday ahead of Gupta's scheduled May 21 trial.

Gupta, a one-time global head of the McKinsey & Co consultancy, is the most prominent corporate executive charged in the U.S. government's investigation of illicit trading on Wall Street.

The wiretaps include the same ones admitted by U.S. District Judge Richard Holwell at Rajaratnam's insider-trading trial. Rajaratnam, founder of the Galleon Group, was convicted last May and is serving an 11-year prison term.

Rakoff ruled that the government could use the recordings at Gupta's trial, saying that "insider trading cannot often be detected, let along successfully prosecuted, without the aid of wiretaps."

But Gupta also won a victory as Rakoff directed the U.S. Securities and Exchange Commission, which has a separate civil case against Gupta, to turn over some materials to prosecutors. The prosecution must then turn over evidence to the defense that may help Gupta show his innocence.

Rakoff said Gupta had demonstrated a "substantial need" for such evidence that overcomes any need for the SEC to keep the materials private.

Gary Naftalis, a lawyer for Gupta, declined to comment.

The case is U.S. v. Gupta, U.S. District Court, Southern District of New York, No. 11-cr-00907.

(Reporting by Jonathan Stempel in New York; Editing by Lisa Von Ahn)