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Rajat Gupta Seeks to Have Some Insider-Trading Counts Thrown Out

Former Goldman Sachs Inc. Director Rajat Gupta
Rajat Gupta, former Goldman Sachs Inc. director. Photographer: Peter Foley/Bloomberg

Rajat Gupta, the former Goldman Sachs Group Inc. director charged with insider trading as part of the Galleon Group LLC probe, asked a judge to dismiss some of the counts against him.

The government’s indictment focuses on two instances in which the U.S. said Galleon co-founder Raj Rajaratnam traded on information he allegedly received from Gupta, though it “improperly uses those two instances to create five purportedly separate substantive securities-fraud charges,” according to Gupta’s filing in federal court in Manhattan.

“The five substantive securities fraud counts in the indictment, because they stem from just two purported unlawful acts, repeatedly charge what are, at most, two alleged offenses,” according to the filing yesterday. Gupta asked the judge to consolidate the charges or order prosecutors to choose which to pursue.

In a separate filing yesterday, Gupta asked that prosecutors be barred from using wiretap evidence. The government intends to present a “circumstantial case” based on the timing of alleged telephone calls between Gupta and Rajaratnam and recordings the U.S. obtained by wiretapping Rajaratnam’s cell phone, according to the filing.

Gupta’s lawyers said the court’s rejection of a similar bid by Rajaratnam to bar the intercepts as evidence during his trial was incorrect. Federal laws restricting use of wiretaps don’t permit them in investigations of suspected insider trading, according to Gupta’s filing.

P&G, McKinsey

Gupta, who also sat on the board of Procter & Gamble Co. and led McKinsey & Co., was indicted by a federal grand jury in October on five counts of securities fraud and one count of conspiracy to commit securities fraud for passing inside information to Rajaratnam. Gupta also faces a lawsuit filed by the U.S. Securities and Exchange Commission.

Ellen Davis, a spokeswoman for U.S. Attorney Preet Bharara in Manhattan, didn’t immediately return a call seeking comment on the filings after regular business hours yesterday.

Rajaratnam, 54, was convicted in May of directing the biggest insider-trading ring in a generation. His 11-year prison term was the longest sentence ever handed down for such a crime and the culmination of a four-year nationwide probe of insider trading.

He reported to a federal medical prison in Ayer, Massachusetts, on Dec. 5 to begin serving his term A three-judge panel rejected Rajaratnam’s request to remain free while he appeals his conviction.

The case is U.S. v. Gupta, 11-cr-00907, U.S. District Court, Southern District of New York (Manhattan).

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