Former Goldman Sachs Group Inc director Rajat Gupta lost his bid to suppress wiretap evidence at his upcoming criminal trial on charges that he leaked boardroom secrets to hedge fund founder Raj Rajaratnam.

But Gupta also won a key victory as U.S. District Judge Jed Rakoff in Manhattan directed federal prosecutors to review U.S. Securities and Exchange Commission notes from a separate civil fraud case and turn over to the defense any evidence that might show Gupta's innocence.

A former global head of the McKinsey & Co consulting firm, Gupta is the most prominent corporate executive charged in the U.S. government's sweeping investigation of illicit trading on Wall Street. His criminal trial is set for May 21.

Prosecutors say Gupta tipped his friend Rajaratnam between March 2007 and January 2009 about developments at Goldman and Procter & Gamble Co, where Gupta was also a director.

Rakoff also ruled on Tuesday that Gupta's lawyers could depose Goldman Chief Executive Lloyd Blankfein and ask him about meetings he held with federal investigators about the case.

Blankfein was already expected to be called as a government witness at Gupta's trial.

Among the tips that Gupta is accused of providing to Rajaratnam was Goldman's winning a surprise $5 billion injection from Warren Buffett's Berkshire Hathaway Inc at the height of the 2008 financial crisis.

Prosecutors said Gupta later told Rajaratnam that Goldman was on pace to post what became its first quarterly loss as a public company.

Gary Naftalis, a lawyer for Gupta, declined to comment on the Tuesday rulings, as did Goldman spokesman Michael DuVally.

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

The conversations include recordings that also were played at Rajaratnam's insider-trading trial before U.S. District Judge Richard Holwell.

Rajaratnam, founder of the Galleon Group, was convicted last May and is serving an 11-year prison term.

Rakoff also denied Gupta's bid to dismiss some criminal counts, which the defendant claimed were vague or duplicative.

Prosecutors charged Gupta with five counts of securities fraud and one count of conspiracy, but did not accuse him of directly profiting from suspect trades.

Gupta was global head of McKinsey for nine years until he retired in 2007. He was also a director of AMR Corp, the parent of American Airlines.

DISCLOSURES REQUIRED
Rakoff directed the SEC to turn over notes on 44 witness interviews it conducted jointly with the U.S. Attorney's Office, and for that office to then disclose any evidence that might help Gupta's defense.

This evidence is known as 'Brady' material, after a 1963 U.S. Supreme Court case.

Rakoff said Gupta showed a 'substantial need' for such evidence, and rejected prosecutors' contention that they need not review the SEC memoranda because the probes by the Justice Department and the SEC were separate.

"Where, as here, the overwhelming bulk of witness interviews were jointly conducted, there can be no doubt that exculpatory disclosures made during these joint interviews that are reflected in the notes or memoranda of either agency must be disclosed to the defense," Rakoff wrote.

In the ruling on Blankfein, Rakoff gave Gupta's lawyers two hours to depose Blankfein about his meetings to prepare for an earlier deposition, held on Feb 24.

The judge rejected the SEC contentions that this information could not be disclosed, or that Gupta's request was 'a mere naked attempt to obtain the SEC's and the (U.S. Attorney's) legal opinions and strategy'.