Ex-Goldman Sachs Group Inc. director Rajat Gupta asked a federal appeals court for a new insider-trading trial, arguing that evidence in his favor was kept from the jury and evidence against him was wrongly allowed.
Gupta, 64, who sat on the board of New York-based Goldman Sachs and Cincinnati-based Procter & Gamble Co., was sentenced to two years in prison after being convicted of passing information he gathered at board meetings to Galleon Group LLC co-founder Raj Rajaratnam.
U.S. District Judge Jed Rakoff in Manhattan erred when he allowed the government to present wiretaps of conversations not involving Gupta and limited Gupta’s defense case by barring evidence that Rajaratnam had alternative sources of nonpublic information about Goldman Sachs, defense lawyers Gary Naftalis and Seth Waxman said Jan. 18 in court papers.
“The court’s decidedly asymmetrical interpretation of the rules of evidence left the jury with a distorted picture, in which Gupta was accused by the self-serving hearsay of a known fabulist beyond Gupta’s power to cross-examine, but was unable to explain to the jury that he had neither the motive nor the inclination to benefit that person, and that there was a plausible alternative perpetrator,” the defense lawyers wrote.
In a rare move, a federal appeals court in Manhattan in December granted Gupta’s request to remain free while he fights his conviction. Rakoff, who presided over the trial, originally ordered Gupta to begin serving his sentence on Jan. 8.
Rakoff “significantly curtailed” Gupta’s principal defenses and made erroneous rulings in the prosecution’s favor that “decisively tipped the scales” against him, Gupta argued.
Gupta challenged the government’s use of court-authorized wiretaps, saying Rakoff shouldn’t have permitted prosecutors to play recordings of September and October 2008 telephone calls between Rajaratnam and others that didn’t include Gupta.
“The prosecution’s case rested exclusively on circumstantial evidence and predominantly wiretap statements -- not of Gupta, but of Rajaratnam, a highly unreliable declarant, speaking with other people with no connection to Gupta,” his lawyers wrote. “The district court admitted these hearsay statements -- which Gupta could not cross-examine given Rajaratnam’s unavailability.”
Gupta’s lawyers argued that Rakoff wrongly allowed prosecutors to use three recordings of telephone calls in which Gupta wasn’t a participant.
Rakoff also erred when he didn’t allow Gupta’s daughter to testify that he told her he had discovered that Rajaratnam had “swindled” him when he’d withdrawn money from the fund. Gupta lost $10 million, his lawyers said.
Rajaratnam is serving an 11-year prison term for insider trading at the Federal Medical Center Devens in Ayers, Massachusetts.
Gupta, who also served as managing partner of McKinsey & Co. from 1994 to 2003, was convicted by a jury in June of one count of conspiracy and three counts of securities fraud. He was accused of passing illegal information about New York-based Goldman Sachs to Rajaratnam, his friend and business partner.
A federal jury in Manhattan convicted Gupta of twice passing information about Goldman Sachs to Rajaratnam, once on Sept. 23, 2008, and again on Oct. 23, 2008.
The case is U.S. v. Gupta, 12-4448, U.S. Court of Appeals for the Second Circuit (Manhattan).