Witness Ties Ex-Goldman Sachs Board Member to Hedge Fund Boss

The first witness at the New York insider trading trial of a former Goldman Sachs board member says her billionaire boss was "smiling more" after receiving a call that prosecutors said was an inside tip from the defendant.

Caryn Eisenberg, former assistant to Galleon Group hedge fund founder Raj Rajaratnam testified Tuesday that Rajaratnam's smiles followed a phone call he received just before the markets closed on Sept. 23, 2008.

Prosecutors say the defendant, Rajat Gupta, told the hedge fund founder that Goldman Sachs was about to receive a $5 billion investment in the struggling investment bank from Warren Buffet.

Prosecutors say Rajaratnam bought $27 million in Goldman stock and made about $1 million when news was announced the next day. But convincing a jury to convict Gupta may not be simple, as WNYC reported Monday:

While Rajaratnam was convicted of insider trading last year and is now serving an 11-year prison sentence, the evidence around Gupta is circumstantial. Investigators had wiretaps on Rajaratnam's phone lines, but it does not appear there are records of Gupta explicitly passing information to Rajaratnam. The government plans to play for the jury a 24-minute wiretapped call between Rajaratnam and Gupta, but the two men did not at the time discuss committing illegal acts.

WNYC asked former federal prosecutor Robert Mintz to explain the charges against Gupta when they first emerged last year:

"I think it’s difficult to predict exactly where this investigation will ultimately lead," he told WNYC. "But it’s clear that prosecutors are not shying away from going after some very big fish, and making a point of trying to send a message to those who would consider trading on inside information that no matter how powerful and well connected somebody is, prosecutors will bring charges if they believe they can win the case.