Upon filing of criminal complaint/lawsuit by the US government in the District Court, and after a jury trial, Rajat Gupta was convicted of three counts of security fraud (insider trading) and one count of conspiracy to commit fraud. Consequently, Gupta was sentenced to two years of jail and asked to pay a fine of $5 million in November 9, 2012
Since this is a facts-intensive case/lawsuit, there is no credible basis to appeal to the U.S. Supreme Court – the Supreme Court is Court of law, and not a Court of errors and facts. So, this is the end of legal options for Gupta. Here is a summary of the appeal arguments by Gupta.
In his oral arguments before the Second Circuit Court of Appeals in New York on May 21st, 2013 Rajat Gupta’s attorney Seth Waxman, argued that Gupta deserved a new trial because the recordings of September 24th and October 24th, 2008 calls through wiretaps should not have been admitted as evidence, and because Gupta’s daughter’s (Gitanjali’s) testimony was limited.Assistant US Attorney Richard Turlowe countered that Gupta got a fair trial, and that the jury’s verdict should not be overturned
The arguments were heard by a panel of three judges (Judges Amalya Kearse, Jon Newman, and Rosemary Pooler) of the Second Circuit Court of Appeals. It was apparent that the appellate court was searching for answers to two central questions:
1. Was Gupta’s September 23rd, 2008 call to Rajaratnam (within seconds of the Goldman Sachs Board Meeting) and the immediate large trades by Rajaratnam just a “coincidence”? Judge Newman honed in on this.
2. Even if the Court evidence of two wiretaps were excluded and even if Gitanjali’s testimony was not truncated, would the jury have arrived at a different conclusion?
Gupta’s call to Rajaratnam on September 23rd about 3:56 PM immediately after the Goldman Sachs Board is central. In that call, Gupta spoke very briefly (for less than 30-40 seconds) with Rajaratnam. Immediately, in the next 3 minutes or so Rajaratnam placed large trades of Goldman stocks.
While US government argued that it was preposterous to state that the September 23rd call by Gupta to Rajaratnam was anything but a tip, Gupta’s lawyer argued that there was simple and innocent explanation. The explanation is that Gupta was calling Rajaratnam about Rajaratnam’s withdrawal of $25 million from the Voyager international fund and Gupta’s own loss of about $10 million. The timing of Gupta’s call was simply coincidental, according to his lawyer, because Gupta was simply trying to squeeze as many calls as possible before his 4 PM previously scheduled call that day.
Gupta’s lawyer argued that if the lower court had allowed Gupta’s daughter, Gitanjali, to testify that her father was upset with Rajaratnam because he had withdrawn $25 million from the Voyager fund the jury would have heard a plausible explanation for the September 23rd call. Further, if the wiretaps of September 24th and October 24th conversations of Rajaratnam with Galleleon trader(s) had not been admitted, there would have been substantial doubt cast on government’s theory.
Those two arguments of Gupta were not unreasonable, because Gitanjali’s testimony would have been based on her personal knowledge, and the two telephone recordings (wiretaps) could be considered hearsay.
Even the US Assistant Attorney appeared to concede that “hearsay” interpretation for the October 24th call was not unreasonable. But he stood firm that the admission of September 24th call from Rajaratnam to a trader where Rajaratnam boasts of information that he received from a Goldman Sachs board member was correct. With regard to Gitanjali’s testimony, the government attorney pointed out that Gitanjali was able to testify that her father was very “upset” with Rajaratnam. The US attorney argued that incremental additional testimony (namely, that Rajaratnam withdrew $25 million from the Voyager fund without the knowledge of Gupta) would not have made any material difference and in any case Gupta was able to tell the jury about that withdrawal in the summation arguments in the lower court.
It appeared that the panel of judges was persuaded that the admission of the October 24th call was questionable. Judge Rosemary Pooler was very specific on this.However, it was not apparent that the panel felt that admission of September 24th call was improper or that Gitanjali’s additional testimony would have altered the jury’s decision.
If the panel had been persuaded that the admission of the September 24th call was also questionable, and that Gitanjali’s additional testimony would have materially bolstered Gupta’s defense then Gupta would have gotten a new trial. Essentially, the appellate court had to credit Gupta with all his requests – exclude the two wiretaps, and include extended testimony of Gitanjali.
Gurumurthy Kalyanaram strongly felt that Gupta’s burden was too large to successfully to overturn the conviction.