Gupta’s attorney, Gary Naftalis, released the following statement:
We are pleased that the jury acquitted Mr. Gupta on a number of significant charges, including the only charge related to Procter and Gamble. We are obviously disappointed in the jury’s verdict with regard to the other counts, which are based on the hearsay wiretaps of Mr. Rajaratnam.
We believe the facts of this case demonstrate that Mr. Gupta is innocent of all these charges, and that he has always acted with honesty and integrity. This is only Round One. We will be moving to set aside the verdict and will if necessary appeal the conviction.”
The only time that Gupta was caught on tape talking to Raj Rajaratnam concerning anything considered “inside information” was on a call July 29, 2008.
Lila: Actually Mr. Pavlo is being misleading here –
Please read the defendant’s Memorandum In Support of Motion In Limine Number One (US V Gupta 2012 WL1591941)
Walter Pavlo:
“Rajaratnam was found guilty last year and is currently serving an 11-year prison sentence. The FBI was already taping Raj, so when Gupta got on the line they thought they had hooked a larger fish. Gupta’s comments on that call were general observations about a Goldman board meeting where talks of buying a commercial bank were discussed. Goldman never purchased such a bank, nor was Gupta specific about the bank. However, those were turbulent times in the markets and rumors were rampant.
The other call occurred on September 23, 2008, when “Gupta’s phone number” came up on the phone of Raj’s executive assistant, Caryn Eisenberg. Eisenberg, who was a witness for the government, said that Gupta was on the short list of important people who could gain quick access to Raj. That list included Rajiv Goel, Anil Kumar and Danielle Chiesi, all of whom pleaded guilty to insider trading charges. That call, which took place moments after Goldman’s board meeting approving of a $5 billion investment from Warren Buffett, was put through to Raj …. and soon thereafter Raj purchased 267,000 shares of Goldman stock, which was certain to rise on the news. However, there was no recording of that conversation.
Then Gupta had friends, former friends, like Anil Kumar, also formerly of McKinsey and Company, who testified of the close relationship between he, Raj and Gupta. It tied them all together, but still it did not tie Gupta to a specific trade.
Then there was the whole compensation thing. Gupta made no money off of the deals / tips. Even the government tied specific dollar amounts to Raj’s trades, as they did many other traders and tippers. In the Galleon prosecution there were lawyers getting paid money for information and traders reaping huge profits. Not Gupta.
Not only could he not be tied to a specific trade, but there was no trace of any money or benefit that he received.
When a jury is asked to put a man in prison for the rest of his life, shouldn’t the evidence be more than circumstantial?
I mean, if it walks like a duck, quacks like a duck and looks like a duck, is that enough to guarantee it’s a duck?
Lila Rajiva: No, Mr. Pavlo, it could be a….quack decoy!
Actually, this case looks more like another bird:
Insider cases cannot rest solely on who called whom when.
Everyone in the financial/banking sector and many outside would be doing jail-time, otherwise.
Banks and firms all over the country get calls from hedge-funds and analysts and writers all day long.
Unless they are intentionally passing on material non-public information in the hope of profiting from a trade, this is not actionable.
Call 1 (July 29, 2008): There is no evidence that the July call fits any of the criteria.
Call 2 (Sept 23, 2012): And the September call was never recorded, no tip was received, and Gupta is not even named as a tipster.
Case closed.
Walter Pavlo:
For years, this country has prosecuted people who have gone to prison for years, decades, only to find out years later that the prosecution was wrong, the evidence was flawed, the person was innocent. If an intelligent person were to look at the Gupta case, they should correctly assume that he was careless in his friendship with Raj. But when considering a life sentence, perhaps there should have been a bit more.”
Comment:
In this otherwise excellent article, Mr. Pavlo makes what looks like a serious mistake about the July 2008 call.
In the July 29, 2008 call the information that Gupta discussed with Galleon, a client of Goldman’s with EVERY RIGHT TO KNOW about what was happening, was PUBLIC information already sent out by Goldman itself.
Insider trading is when you trade material non-public information for a tangible benefit.
Even Bharara’s team did NOT call the information in that call MATERIAL, although they lied and said it was non-public.
Please read the defendant’s Memorandum In Support of Motion In Limine Number One (US V Gupta 2012 WL1591941)
In this motion, Naftalis & Co, argue convincingly that the July 29, 2008 call is not probative (tending to prove) of the issue at hand (insider trading) but is prejudicial (tending to confuse the actual issue with the appearance of guilt on something else).
It should therefore have been excluded.
Rakoff did NOT exclude it and the effect was exactly as the defense feared it would be.
THE PREJUDICIAL PHONE CALL OF JULY 29, 2008 CONFUSED THE JURY
The jury believed that the conversation on that phone call (which was neither material, nor non-public, nor productive of a tip or trade or benefit) somehow meant that Gupta must have always been talking to Raj in the same way about every other board meeting, even at board meetings where non-public and material information was discussed.
The jury then believed it must have been Gupta who gave the alleged tip that resulted in the Galleon trades on Sept 23, at 3:57 and 3:58.
[I am unable, for some reason, to copy-paste the relevant portion, but it is on page 3 (of 6) of the document I cite above.]
To repeat one last time, the July 29, 2008 call which was used by Bharara to tar the defendant was:
1. NOT MATERIAL The facts are that Goldman itself conceded the information in the July 2008 call was not material, in the sense of being crucial to make or not make a trade. It was giving it out to important clients (Galleon was one, remember) and to analysts anyway.
2. NOT NON-PUBLIC As to non-public, the financial press, including Dow Jones, Merrill Lynch and Oppenheimer analysts, and Wall Street Journal, had already discussed the issues Gupta passed on to Galleon’s Raj. Bharara simply LIED when he said this information was non-public. Check the defense’s memo above.
3. LED TO NO TIP OR TRADE
And finally, this call led to no tip or trade from Gupta and cannot be tied to any profit by him or Galleon.
So, tell me, why did Judge Rakoff allow Bharara to bring this into the case, except to provide a wire-tapped private conversation that would sound incriminating to an undiscerning person?