Monday, March 31st, 2014

Circuit Affirms Former Goldman Sachs Director’s Insider Trading Convictions

United States v. Gupta, No. 12-4448-cr (2d Cir. Mar. 25, 2014) (Newman, Kearse, and Pooler), available here

Rajat K. Gupta, a former director of The Goldman Sachs Group, was convicted, after a jury trial, of three counts of securities fraud and one count of conspiracy to commit securities fraud, based on insider trading. He was sentenced to 24 months of imprisonment, one year of supervised release, and a fine of $5 million. This published decision affirms the judgment.

Gupta argued on appeal that the trial court (Judge Rakoff) erred (1) by admitting statements of a coconspirator (Raj Rajaratnam), recorded in wiretapped telephone conversations to which Gupta was not a party, and (2) by excluding relevant evidence offered by Gupta.

The Circuit rejected these arguments. It held, first, that Rules 801 and 804 of the Federal Rules of Evidence allowed the admission of Rajaratnam’s recorded statements, both as non-hearsay statements in furtherance of the charged “Rajaratnam-Gupta conspiracy” and under the exception for statements against penal interest.   

The Court also held that the district court did not commit reversible error by limiting or excluding evidence proffered by the defense to show that any communication by Gupta of inside information to Rajaratnam was improbable. This evidence included testimony from Gupta’s daughter Geetanjali suggesting that Gupta was angry with Rajaratnam at the relevant time and therefore was unlikely to have shared insider information with him.

The Circuit held that the trial court did not abuse its discretion by concluding, under Fed. R. Evid. 403, that this evidence was “cumulative” and would have been “unfairly prejudicial” to the government. The Court further held that any error was harmless.

Finally, the Circuit upheld the exclusion of other defense evidence, including evidence that ostensibly suggested that someone else had provided confidential information to Rajaratnam, evidence of Gupta’s intent to give to charity, and character testimony indicating that Gupta had “integrity.”

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