Rajat Gupta Gets Two-Year Sentence for Insider Trading

October 25, 2012

Bloomberg on October 24, 2012 released the following:

“By Patricia Hurtado, David Glovin and Bob Van Voris

Former Goldman Sachs Group Inc. (GS) director Rajat Gupta was sentenced to two years in prison for insider trading, marking the downfall of a man who rose to the top of corporate America after being orphaned as an 18-year-old in Kolkata.

Gupta, who ran McKinsey & Co. from 1994 to 2003, was sentenced today by U.S. District Judge Jed Rakoff in Manhattan for leaking stock tips to Galleon Group LLC co-founder Raj Rajaratnam. Gupta, 63, was convicted in June of securities fraud and conspiracy. He is set to report to prison on Jan. 8. He was also fined $5 million.

The evidence that Gupta passed illegal information about Goldman Sachs to Rajaratnam was “not only overwhelming, it was disgusting in its implications,” Rakoff said in court today before handing down the sentence.

Prosecutors had sought a prison term for Gupta of as long as 10 years. Gupta requested probation and community service, and his lawyer had proposed that he work with needy children in New York or the poor in Rwanda.

In his 17 years as a judge, Rakoff has sentenced at least nine defendants other than Gupta for insider trading, including seven who pleaded guilty and two whom he jailed after they were found guilty by juries. Rakoff has a track record of imposing sentences that are half what the government recommends.

Insider Probes

From Jan. 1, 2011 to July of this year, federal judges in Manhattan sent the average insider-trading violator to prison for more than 22 months, according to an analysis of sentencing data by Bloomberg News. That was a 20 percent increase from the average term of 18.4 months during the previous eight years.

Over the same 18-month period, the average sentence after trial was 58 months, compared with 22 months during the same time for 18 defendants who pleaded guilty. Of the dozen defendants who pleaded guilty and agreed to cooperate with the U.S. insider-trading probe during that time, 11 avoided prison altogether. One got six months.

“With today’s sentence, Rajat Gupta now must face the grave consequences of his crime — a term of imprisonment,” Manhattan U.S. Attorney Preet Bharara said in a statement. “His conduct has forever tarnished a once-sterling reputation that took years to cultivate.”

‘Innovative’ Proposal’

During today’s hearing, Rakoff said the Rwanda community service proposal was “very innovative.”

“I thought, ah, this was the Peace Corps for insider traders,” the judge said to Gupta’s lawyer, Gary Naftalis. “But I think if everything you told me about Mr. Gupta’s character is correct, and I think it is, he would be doing this regardless of a court order or not. So looking at it in a cynical kind of way, it is not punishment.”

Before he was sentenced, Gupta told the judge that “I lost my reputation that I built over a lifetime. The last 18 months have been the most challenging period of my life since my parents died when I was a teenager.”

Gupta served on the boards of Procter & Gamble Co. (PG) and AMR Corp. (AAMRQ) and won praise for his charity from Microsoft Corp. (MSFT) Chairman Bill Gates and former United Nations Secretary-General Kofi Annan. As McKinsey’s youngest managing director, he almost tripled the firm’s revenue.

Helped ‘Many’

Gupta’s life “has been an extraordinary one,” Naftalis said today in court. He said his client has made “extraordinary contributions that have tangibly helped many, many people on this planet.” His crimes are a “total aberration in an otherwise laudatory life.”

Gupta was convicted by a jury of leaking tips to Rajaratnam, his friend and business partner, about New York- based Goldman Sachs. Gupta leaked information including a $5 billion investment by Warren Buffett’s Berkshire Hathaway Inc. (BRK/B) on Sept. 23, 2008, and a tip on a quarterly loss.

The jury acquitted Gupta of charges that he leaked information that Cincinnati-based P&G’s organic sales growth would fall below estimates and that he tipped Rajaratnam, 55, about Goldman Sachs’s earnings in the first quarter of 2007.

Unlike the Rajaratnam prosecution, which was based on dozens of wiretaps of his mobile-phone conversations, the case against Gupta was circumstantial and built on trading records, business relationships and comments by Rajaratnam or others about Galleon’s sources of information. The jury heard one wiretapped conversation between Gupta and Rajaratnam. Naftalis told the judge today that he would challenge Rakoff’s decision to admit the recording and other evidentiary rulings he made during the trial on appeal.

The case is U.S. v. Gupta, 11-cr-907, U.S. District Court, Southern District of New York (Manhattan).”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Appeal

————————————————————–

To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Appeal in Insider Trading Case Centers on Wiretap

October 24, 2012

The New York Times on October 23, 2012 released the following:

“BY PETER LATTMAN

In March 2008, the Justice Department made an extraordinary request: It asked a judge for permission to record secretly the phone conversations of Raj Rajaratnam, a billionaire hedge fund manager.

The request, which was granted, was the first time the government had asked for a wiretap to investigate insider trading. Federal agents eavesdropped on Mr. Rajaratnam for nine months, leading to his indictment — along with charges against 22 others — and the biggest insider trading case in a generation.

On Thursday, lawyers for Mr. Rajaratnam, who is serving an 11-year prison term after being found guilty at trial, will ask a federal appeals court to reverse his conviction. They contend that the government improperly obtained a wiretap in violation of Mr. Rajaratnam’s constitutional privacy rights and federal laws governing electronic surveillance.

Such a ruling is considered a long shot, but a reversal would have broad implications. Not only would it upend Mr. Rajaratnam’s conviction but also affect the prosecution of Rajat K. Gupta, the former Goldman Sachs director who was convicted of leaking boardroom secrets to Mr. Rajaratnam. Mr. Gupta is scheduled to be sentenced on Wednesday.

A decision curbing the use of wiretaps would also affect the government’s ability to police Wall Street trading floors, as insider trading cases and other securities fraud crimes are notoriously difficult to build without direct evidence like incriminating telephone conversations.

“Wiretaps traditionally have been used in narcotics and organized crime cases,” said Harlan J. Protass, a criminal defense lawyer in New York who is not involved in the Rajaratnam case. “Their use today in insider trading investigations indicates that the government thinks there may be no bounds to the types of white-collar cases in which they can be used.”

More broadly, Mr. Rajaratnam’s appeal is being closely watched for its effect on the privacy protections of defendants regarding wiretap use. Three parties have filed “friend-of-the-court” briefs siding with Mr. Rajaratnam. Eight former federal judges warned that allowing the court’s ruling to stand “would pose a grave threat to the integrity of the warrant process.” A group of defense lawyers said that upholding the use of wiretaps in this case would “eviscerate the integrity of the criminal justice system.”

To safeguard privacy protections, federal law permits the government’s use of wiretaps only under narrowly prescribed conditions. Among the conditions are that a judge, before authorizing a wiretap, must find that conventional investigative techniques have been tried and failed. Mr. Rajaratnam’s lawyers said the government misled the judge who authorized the wiretap, Gerard E. Lynch, in this regard.

They say that the government omitted that the Securities and Exchange Commission had already been building its case against Mr. Rajaratnam for more than a year using typical investigative means like interviewing witnesses and reviewing trading records. Had the judge known about the S.E.C.’s investigation, he would not have allowed the government to use a wiretap, Mr. Rajaratnam’s lawyers argue.

Before Mr. Rajaratnam’s trial, the presiding judge, Richard J. Holwell, held a four-day hearing on the legality of the wiretaps. Judge Holwell criticized the government, calling its decision to leave out information about its more conventional investigation a “glaring omission” that demonstrated “a reckless disregard for the truth.”

Nevertheless, Judge Holwell refused to suppress the wiretaps, in part, he said, because they were necessary to uncover Mr. Rajartanam’s insider trading scheme. “It appears that the S.E.C., and by inference the criminal authorities, had hit a wall of sorts,” Judge Holwell wrote.

On appeal, Mr. Rajaratnam lawyers argued that the government’s lack of candor should not be tolerated. They described the government’s wiretap application as full of “misleading assertions” and “outright falsity” that made it impossible for Judge Lynch to do his job.

“The government’s self-chosen reckless disregard of the truth and of the critical role of independent judicial review breached that trust and desolated the warrant’s basis,” wrote Mr. Rajaratnam’s lawyers at the law firm Akin Gump Strauss Hauer & Feld.

In their brief to the appeals court, federal prosecutors dispute that they acted with a “reckless disregard for the truth.” Instead, they argue that omitting details of the S.E.C.’s investigation was at most “an innocent mistake rising to the level of negligence.” In addition, they said that the S.E.C.’s inquiry failed to yield sufficient evidence for a criminal case, necessitating the use of a wiretap.

Once Judge Lynch signed off on the wiretap application, the government’s investigation into Mr. Rajaratnam accelerated. The wiretapping of Mr. Rajaratnam’s phone, along with the subsequent recording of his supposed accomplices, yielded about 2,400 conversations. In many of them, Mr. Rajaratnam could be heard exchanging confidential information about technology stocks like Google and Advanced Micro Devices.

Three years ago this month, federal authorities arrested Mr. Rajaratnam and charged him with orchestrating a seven-year insider trading conspiracy. The sprawling case has produced 23 arrests of traders and tipsters, many of them caught swapping secrets with Mr. Rajaratnam about publicly traded companies.

Among the thousands of calls were four that implicated Mr. Gupta, a former head of the consulting firm McKinsey & Company who served as a director at Goldman Sachs and Procter & Gamble. On one call in July 2008, the only wiretapped conversation between the two men, Mr. Gupta freely shared Goldman’s confidential board discussions with Mr. Rajaratnam. On another, Mr. Rajaratnam told a colleague at his hedge fund, the Galleon Group, “I heard yesterday from somebody who’s on the board of Goldman Sachs that they are going to lose $2 per share.”

Those conversations set off an investigation of Mr. Gupta. He was arrested in October 2011 and charged with leaking boardroom secrets about Goldman and P.& G. to Mr. Rajaratnam. A jury convicted him in May after a monthlong trial.

On Wednesday at Federal District Court in Manhattan, Judge Jed S. Rakoff will sentence Mr. Gupta. Federal prosecutors are seeking a prison term of up to 10 years. Mr. Gupta’s lawyers have asked Judge Rakoff for a nonprison sentence of probation and community service. One proposal by the defense would have Mr. Gupta living in Rwanda and working on global health issues.

Regardless of his sentence, Mr. Gupta plans to appeal. And because prosecutors used wiretap evidence in his trial, Mr. Gupta would benefit from a reversal of Mr. Rajaratnam’s conviction.

Yet a reversal would not affect the convictions of the defendants in the conspiracy who have pleaded guilty. As part of their pleas, those defendants waived their rights to an appeal.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Appeal

————————————————————–

To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Gupta to Urge Probation From Judge Who Once Defended Insiders

October 22, 2012

San Francisco Chronicle on October 22, 2012 released the following:

“Patricia Hurtado and David Glovin, ©2012 Bloomberg News

Oct. 22 (Bloomberg) — As a lawyer, Jed Rakoff once persuaded a judge to give probation to a client convicted at an insider-trading trial alongside former Wall Street Journal reporter R. Foster Winans. Now a federal judge himself, Rakoff must weigh Rajat Gupta’s similar request to stay out of prison.

Gupta, a former Goldman Sachs Group Inc. director, will come before Rakoff in Manhattan federal court on Oct. 24 to be sentenced for leaking stock tips to Galleon Group LLC co-founder Raj Rajaratnam. Prosecutors say Gupta, convicted by a jury in June, deserves as long as 10 years in prison. Gupta seeks probation.

Gary Naftalis, a lawyer for Gupta, argued his client’s crime was an “aberrational” event in a “lifetime of good works” that merited a punishment for a man who has suffered an extraordinary fall from grace. He asked Rakoff to impose a term of community service, suggesting Gupta work with troubled youth in New York or with the poor in Rwanda.

“Good works help, but on their own they are rarely a ‘Get out of jail free card,’” said Gordon Mehler, a former federal prosecutor who’s now in private practice in New York. “So, it seems as if probation, even in Rwanda, is unlikely.”

Gupta, 63, is the most prominent of 70 people convicted since a nationwide insider-trading crackdown by U.S. prosecutors began four years ago. Gupta also served as managing partner of McKinsey & Co. from 1994 to 2003 and on the board of Procter & Gamble Co. from 2007 to March 2011, when he also resigned from the boards of Goldman Sachs, AMR Corp. and two other companies.

Buffett’s Berkshire

After a four-week trial in June, jurors found Gupta guilty of tipping Rajaratnam about dealings at New York-based Goldman Sachs, including a $5 billion investment by Warren Buffett’s Berkshire Hathaway Inc. Rajaratnam, 55, is serving 11 years in prison for trading on tips from Gupta and others.

In his 17 years as a judge, Rakoff has sentenced at least nine defendants for insider trading, including seven who pleaded guilty and two whom he jailed after they were found guilty by juries. Rakoff has a track record of imposing a sentence that is half what the government recommends.

“If there is any judge who’s sensitive to the draconian impact of the sentencing guidelines with respect to white-collar offenders, it’s Judge Rakoff,” said J. Bruce Maffeo, a former federal prosecutor now in private practice. “That being said, he’s equally sensitive to the need to fashion a sentence that takes into account both the defendant’s personal background and the need to deter others in the financial world, where this kind of activity appears to be more prevalent than previously assumed.”

Winning Leniency

Rakoff, a former federal prosecutor in New York who headed the office’s securities-fraud unit, was a white-collar criminal- defense lawyer before taking the bench.

As a defense lawyer, Rakoff won leniency for a client convicted of insider trading who was also facing prison.

Rakofff’s client, David Carpenter, went on trial in 1985 with his lover, journalist R. Foster Winans, and broker Kenneth Felis. Prosecutors said Winans leaked tips to Felis about forthcoming market-moving articles in his “Heard on the Street” column, Felis traded on the news and Carpenter allowed Winans to place trades through his account. All were convicted. Carpenter died in 1991.

Wife, Husband

At the sentencing, Rakoff compared Carpenter’s relationship with Winans to that of wife-and-husband and said Carpenter merely acquiesced to Winans’ trades, according to Winans’s lawyer, Don Buchwald. Carpenter got probation while Winans was given an 18-month prison term.

“He was following Foster,” Buchwald said in a phone interview last week. “Carpenter was a very sympathetic figure.”

This week, Gupta will be seeking sympathy of a different sort from Rakoff. Gupta’s lawyer, Naftalis, said in a court filing that Gupta deserves probation because his crime was an aberration in a life “defined by helping others.”

Naftalis cited Gupta’s work as chairman of the Global Fund, an initiative to fight AIDS, tuberculosis and malaria, as well as his work with the United Nations to improve world health. Naftalis declined to comment on a comparison of the Gupta and Carpenter cases. The defense submitted more than 400 letters to the judge describing Gupta’s accomplishments.

In their pre-sentencing court filings, prosecutors gave a different portrait of Gupta and asked Rakoff to consider the personal relationship between Gupta and Rajaratnam.

‘Very Close Friend’

In asking for a term of 97 months to 121 months, which they say are called for by U.S. sentencing guidelines, prosecutors say Gupta violated confidences and breached his duty as a senior corporate official by leaking news to his “very close friend” and business partner.

“Gupta’s interests often were aligned with those of Rajaratnam and Galleon such that Gupta stood to benefit if Galleon was successful,” prosecutors wrote in a filing, citing Gupta’s investment in Galleon and their partnership in another investment fund.

Richard Holwell, the former federal judge who presided over Rajaratnam’s trial and sentenced the fund manager, said judges consider “general deterrence,” or whether the sentence they impose will deter others from committing similar crimes.

“The nature and circumstances of the crime weigh in the government’s favor, because insider trading is a serious white- collar crime that undermines the integrity of the markets” said Holwell, who is now in private practice.

Deterrence

“The government will lean on general deterrence because insider trading has to be eradicated and one way to do that is by taking highly visible cases and making examples of them,” Holwell said. “That will weigh heavily on Rakoff.”

Other criminal defense lawyers said Gupta’s fall from grace may work in his favor. Kevin O’Brien, a former federal prosecutor in New York, said the judge must weigh Gupta’s achievements against his crimes.

“There is human drama there,” O’Brien said. “You can make the argument that for a guy like this who was on top of the world to have fallen so low and to have been so humiliated and exposed by a lengthy public trial, that is punishment enough.”

“What is smart about the Rwanda option is that it makes vivid Gupta’s commitment to public service and brings out with some clarity his history of good deeds,” he said. “It’s a creative approach.”

‘Mirage’ Guidelines

Federal sentencing guidelines are advisory. Rakoff’s history has been one of imposing sentences well below the recommended federal guidelines, which he has called a “mirage of something that can be obtained with arithmetic certainty.”

Last year, he sentenced James Fleishman, a former executive at expert-networking firm Primary Global Research LLC, to 2 1/2 years in prison for passing tips to fund managers while the guidelines called for more than seven years. He also ordered Primary Global consultant Winifred Jiau to serve 48 months for selling information. Her guidelines suggested a term of 78 months to 97 months in prison.

Still, Rakoff has rarely been silent about the contempt he has for insider traders, often expressing his sentiments in open court. In Fleishman’s case, he said insider prosecutions over “the last 30 or 40 years” have not “done enough to deter this serious and sophisticated crime.”

With Jiau, whose scheme ran for two years, he said the leaks undermined “the integrity of the financial markets” and demanded a “meaningful sentence.”

Maffeo said he believes Rakoff will impose some term of incarceration upon Gupta.

Love Families

Rakoff has demanded prison in cases in which, unlike Gupta, the defendants have admitted trafficking in illicit information. He sentenced ex-SAC Capital Advisors LP manager Donald Longueuil to 30 months instead of the 46 months to 57 months urged by the guidelines. He ordered a former Taiwan Semiconductor Manufacturing Co. manager to spend 18 months behind bars.

“Why is it that defendants always remember how much they love their families after they’ve committed the crimes that place that relationship in jeopardy?” Rakoff said at the sentencing of former Galleon trader Adam Smith, who won probation largely because he cooperated with prosecutors and testified against Rajaratnam.

Rakoff imposed an 18-month prison term on Manosha Karunatilaka, a former Taiwan Semiconductor Manufacturing Co. manager who pleaded guilty to passing nonpublic information about his company’s orders to fund managers as part of an insider-trading scheme. Karunatilaka cooperated with the U.S. and accepted responsibility for his crimes.

Crying Infant

As Karunatilaka’s infant child cried in the courtroom, Rakoff rejected a bid by defense lawyer Brad Bailey to impose a term of six months’ in prison and six months of home confinement.

Gupta, after two days of deliberations by a jury, was found guilty of three counts of securities fraud and one count of conspiracy. The tips came in September and October 2008 and concerned Buffett’s $5 billion investment in Goldman Sachs and the bank’s losses in the fourth quarter of 2008.

Jurors acquitted Gupta of charges that he leaked information that Cincinnati-based P&G’s organic sales growth would fall below estimates and that he tipped Rajaratnam about Goldman Sachs’s earnings in the first quarter of 2007.

In his filing, Naftalis argued that Gupta deserves leniency because his crimes were limited to a two-month period in 2008.

Peter Henning, a professor at Wayne State University Law School in Detroit, said Rakoff will focus on the nature of the crime and Gupta’s background. Henning predicted that the former Goldman Sachs director will get a prison term of two years to three years.

“That’s not a deleterious prison term, but it is prison and it doesn’t mean he will get a free pass,” Henning said in a phone interview. “It has to be a term to get everyone’s attention, and by everyone, I mean Wall Street.”

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

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

————————————————————–

To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Former Corporate Chairman of Consulting Firm and Board of Director Rajat Gupta Found Guilty of Insider Trading in Manhattan Federal Court

June 15, 2012

The Federal Bureau of Investigation (FBI) on June 15, 2012 released the following:

“Gupta Convicted on Four Counts Arising from an Insider Trading Scheme in which He Provided Confidential Information About Goldman Sachs to His Business Partner and Friend, Raj Rajaratnam

Preet Bharara, the United States Attorney for the Southern District announced that Rajat K. Gupta, former corporate chairman of an international consulting firm and a member of the Boards of Directors of The Goldman Sachs Group Inc. (“Goldman Sachs”) and the Procter & Gamble Company (“P&G”), was found guilty today by a jury in Manhattan federal court of conspiracy and securities fraud crimes stemming from his involvement in an insider trading scheme with his business partner and friend, Raj Rajaratnam, the founder and former head of the Galleon Group.

Manhattan U.S. Attorney Preet Bharara stated, “Rajat Gupta once stood at the apex of the international business community. Today, he stands convicted of securities fraud. He achieved remarkable success and stature, but he threw it all away. Having fallen from respected insider to convicted inside trader, Mr. Gupta has now exchanged the lofty board room for the prospect of a lowly jail cell. Violating clear and sacrosanct duties of confidentiality, Mr. Gupta illegally provided a virtual open line into the board room for his benefactor and business partner, Raj Rajaratnam.

“Almost two years ago, we said that insider trading is rampant, and today’s conviction puts that claim into stark relief. It bears repeating that, in coordination with our extraordinary partners at the FBI, we will continue to pursue those who violate the securities laws, regardless of status, wealth, or influence. I thank the members of the jury for their time, attention, and service, and the dedicated career prosecutors from my office who so ably tried this case.”

According to the superseding indictment filed in Manhattan federal court, other court documents, statements made at trial, and court proceedings:

During all relevant times, Gupta and Rajaratnam maintained a close personal and business relationship. Among other things, Gupta described Rajaratnam as a close friend; Gupta invested his money in Galleon funds while he served as chairman of the international consulting firm; Gupta co-owned a fund of funds with Rajaratnam, which invested its money in Galleon funds; Gupta served as chairman of a $1.5 billion private equity firm called NSR in which Rajaratnam invested approximately $50 million and served on the investment committee; and Gupta was given the position of Chairman of Galleon International in 2008 and expected to receive 15 percent of that fund’s performance fees.

From 2007 through January 2009, Gupta repeatedly disclosed material, non-public information (“inside information”) that he acquired in his capacity as a member of the Board of Directors of Goldman Sachs, with the understanding that Rajaratnam would use the inside information to purchase and sell securities. Rajaratnam, in turn, caused the execution of transactions in the securities of Goldman Sachs on the basis of the inside information and shared the inside information with others at Galleon, thereby earning illegal profits, and illegally avoiding losses, of millions of dollars. On separate occasions that were proven at trial, Gupta gave Rajaratnam inside information that included highly sensitive and secret information. Illegal tips that were proven at trial include the following:

The September 23, 2008 Goldman Sachs Tip

The evidence at trial proved that, on September 23, 2008, within approximately 60 seconds after the conclusion of a Goldman Sachs telephonic board meeting in which the Board approved a $5 billion investment by Berkshire Hathaway, Gupta spoke with Rajaratnam. Immediately following the call, Rajaratnam directed two separate traders to purchase approximately $43 million of Goldman Sachs stock within minutes before the close of trading. During two court-authorized wiretapped conversations the following morning on September 24, 2008 between Rajaratnam and his principal trader and coconspirator, Ian Horowitz, Rajaratnam said that he received a call at 3:58 p.m. the day before telling him “something good’s gonna happen” at Goldman Sachs, that he directed the two traders to buy Goldman shares before the market closed, and that he could not yell this information out on Galleon’s trading floor. The evidence at trial showed that, based on Gupta’s illegal tip, Rajaratnam and co-conspirator Gary Rosenbach earned over $1 million in illegal profits.

The October 23, 2008 Goldman Sachs Tip

The evidence at trial proved that, on October 23, 2008, Gupta participated on a Goldman Sachs Board posting call during which he learned that Goldman Sachs was losing money for the quarter, which Goldman Sachs had never done since becoming a public company. Just 23 seconds after that call ended, Gupta called Rajaratnam. Following that call, at the first available opportunity after the stock market reopened, Rajaratnam started to sell his entire holdings in Goldman Sachs stock. Later that day, during a court-authorized wiretapped conversation, Rajaratnam explained to a senior portfolio manager at Galleon International that Rajaratnam had spoken with a member of the Board of Goldman Sachs and learned that Goldman Sachs was losing money during the quarter while Wall Street analysts expected the company to make money. The evidence at trial showed that, based on Gupta’s illegal tip, Rajaratnam was able to avoid losses of several million dollars.

* * *

Gupta, 63, of Westport, Connecticut, was found guilty of one count of conspiracy to commit securities fraud and three counts of securities fraud. He was acquitted on two securities fraud counts. The conspiracy count carries a maximum sentence of five years in prison and a maximum fine of the greater of $250,000 or twice the gross gain or loss from the offense. Each of the securities fraud counts carries a maximum sentence of 20 years in prison and a fine of $5 million. Gupta will be sentenced on October 18, 2012.

Rajaratnam was convicted in a jury trial on May 11, 2011 of 14 counts of conspiracy and securities fraud. He was sentenced on October 13, 2011 to 11 years in prison and was ordered to pay forfeiture in the amount of $53,816,434 and a $10 million fine.

Mr. Bharara praised the outstanding efforts of the FBI. He also thanked the SEC for its assistance in the investigation.

This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which U.S. Attorney Bharara serves as a co-chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch and, with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

Assistant U.S. Attorneys Reed Brodsky and Richard C. Tarlowe are in charge of the prosecution.

– Statement by FBI New York Assistant Director in Charge Janice K. Fedarcyk on Gupta’s conviction”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Appeal

————————————————————–

To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Detail by Detail, Gupta’s Lawyer Deconstructs Goldman Testimony

June 11, 2012

The New York Times on June 11, 2012 released the following:

“BY AZAM AHMED AND PETER LATTMAN

It had to have been among the least productive weeks of Lloyd C. Blankfein’s six-year tenure as the chief executive of Goldman Sachs.

For the better part of three days this week, Mr. Blankfein testified at the trial of Rajat K. Gupta, the former Goldman director who is facing charges that he leaked the bank’s secret boardroom discussions to the hedge fund manager Raj Rajaratnam from 2007 to 2009.

Though Mr. Blankfein appeared at ease in the courtroom, he had to clear his busy calendar. He could not monitor the volatility in the financial markets. He could not even check his BlackBerry, to which he has acknowledged something of an addiction. In short, he could not do his job.

Instead, Mr. Blankfein, who has spent most of his career in the fast-paced environment of a trading floor, had to sit still on the witness stand and respond to hours of often-monotonous questions. Lawyers on both sides had him discuss Goldman’s inner workings, from the contents of board meetings to his relationship with his lieutenants.

Goldman has played a starring role in the trial of Mr. Gupta, which wrapped up its third week in Federal District Court in Manhattan before Judge Jed S. Rakoff. The prosecution rested its case on Friday, and the defense began to put on its own witnesses.

Late Friday, after the jury had gone home for the weekend, Gary P. Naftalis, a lawyer for Mr. Gupta, said it was “highly likely” that Mr. Gupta would testify in his own defense next week.

Mr. Naftalis spent much of Friday cross-examining Mr. Blankfein to try to show that some of the information Mr. Gupta is accused of leaking was known by the market and thus not “material nonpublic information” under the insider trading laws.

The line between public and private information is critical in the case, and Mr. Naftalis worked hard to try to erase that line. He showed Mr. Blankfein two reports from analysts who followed Goldman during the 2008 financial crisis. The reports, written by analysts at Merrill Lynch and Oppenheimer, raise the prospect of Goldman buying a retail bank. Both reports came after meetings with top Goldman officials.

“GS Bank & Trust?” pondered one report. “Don’t rule it out.”

A rationale for putting the reports before the jury was to minimize damage from the only phone conversation between the two recorded by a Federal Bureau of Investigation wiretap. During that call, in July 2008, Mr. Gupta tells Mr. Rajaratnam that Goldman’s board is considering buying a bank.

A jury convicted Mr. Rajaratnam, who ran the now-defunct Galleon Group hedge fund, of orchestrating an extensive insider trading conspiracy last year.

At times, Mr. Naftalis and Mr. Blankfein often seemed to fight for the jury’s affection. While Mr. Blankfein was being presented with a batch of news pieces about Goldman’s possible purchase of a bank, an article flashed on the overhead screen with a photograph of Mr. Blankfein resting his face on his left hand. This prompted laughter from the jury and spectators.

Mr. Blankfein, seizing the moment, mimicked the pose from the witness stand, leading to more cackling in the courtroom.

Comparing Mr. Blankfein’s pose against the photograph, Mr. Naftalis instructed the chief executive to move his hand “down and a little to the left.”

As he left the courtroom, Mr. Blankfein acknowledged the jury with a nod and a smile.

Before resting their case on Friday, prosecutors played several secretly recorded short voice mail messages left by Mr. Gupta on Mr. Rajaratnam’s cellphone. During one on Oct. 10, 2008, a time of market turmoil during the financial crisis, Mr. Gupta says: “Hey Raj, Rajat here. Just calling to catch up. I know it must be an awful and busy week. I hope you are holding up well. Uh, and I’ll try to give you a call over the weekend just to catch up. All the best to you, talk to you soon. Bye bye.”

Mr. Gupta’s lawyers have said that by October 2008, Mr. Gupta had lost his entire $10 million in a Galleon fund and had a falling-out with Mr. Rajaratnam and thus had no interest in passing along insider tips. The friendly tone of the voice mail message was the prosecution’s effort to debunk that theory. Reed Brodsky, a prosecutor, rested the government’s case after playing the recordings.

For the last 45 minutes of the day, the jury watched the defense’s videotaped deposition of Ajit Jain, a top lieutenant at Berkshire Hathaway and a top contender to succeed Warren E. Buffett, Berkshire’s chief executive.

Mr. Jain, a friend of Mr. Gupta’s, testified about the acrimony that had developed between Mr. Gupta and Mr. Rajaratnam. He said that during a lunch in January 2009 at an Italian restaurant in Stamford, Conn., Mr. Gupta told him about the bad blood.

“He told me that he had $10 million invested and he had been gypped, swindled and cheated by Raj and had lost his $10 million.””

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


As Gupta Insider Trading Trial Begins, Prosecution to Call First Witness

May 22, 2012

WNYC News on May 22, 2012 released the following:

By WNYC Newsroom

“Federal prosecutors are expected to call their first witness in the case against former Goldman Sachs board member Rajat Gupta on Tuesday.

The witness list in the case reads like a who’s who in business, including Warren Buffet and Lloyd Blankfein. But the prosecution is expected to call Gupta’s former secretary, Caryn Eisenberg to the stand first. Other possible witnesses for the prosecution on Tuesday include an FBI agent and a former co-worker of Gupta’s from the consulting firm McKinsey.

Prosecution and defense teams have made their opening arguments in the trial of the prominent NY businessman on Monday.

Government lawyer said they have Gupta’s phone records that show he illegally passed corporate secrets to his friend, Raj Rajaratnam, who ran a hedge fund. Assistant U.S. Attorney Reed Brodsky told jurors in opening statements that Gupta “threw away his duties, threw away his responsibilities and broke the law.”

Brodsky recounted how former billionaire Rajaratnam earned close to $1 million after Gupta told him in a phone call that Goldman had received an offer from Warren Buffett’s Berkshire Hathaway to invest $5 billion in the banking giant in 2008.

“That was trading on secrets coming from someone who actually knew what was happening in the confines of the board room,” Brodsky said. “That’s called insider trading and that’s a serious crime.”

Gupta’s lawyer said the prosecution’s evidence is like a cropped photograph. It doesn’t tell the whole story, it’s circumstantial. He questioned why a rich and successful businessman take this risk.

Defense attorney Gary P. Naftalis told jurors that Gupta “never defrauded anybody. He never cheated anybody.” Naftalis argued the call harms rather than helps the government’s case because no unusual trading occurred around that time, and the men were discussing information already reported by analysts and journalists.

The 63-year-old Gupta was a former Goldman Sachs board member, and also a former board member at Procter & Gamble Co.

Gupta has pleaded not guilty to conspiracy and securities fraud charges that carry a potential for more than 100 years in prison.”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

————————————————————–

To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.


Gupta seeks calls thrown out of U.S. insider trial

May 8, 2012

CNBC on May 8, 2012 released the following:

“NEW YORK (Reuters) – Former Goldman Sachs board member Rajat Gupta, the most prominent corporate figure indicted in a U.S. crackdown on insider trading, has asked a judge to throw out more than two dozen phone conversations that the government has sought to present as evidence at his trial.

Gupta’s lawyers argued in court papers filed Monday night that as many as 26 recorded calls had nothing to do with allegations that Gupta gave inside tips to his onetime friend, convicted Galleon Group hedge fund manager Raj Rajaratnam.

Gupta’s trial starts on May 21 in U.S. District Court in Manhattan. A onetime head of McKinsey & Co, he is accused of giving Rajaratnam secrets of Goldman and Procter & Gamble board meetings in 2007 and 2008. In addition to sitting on the Goldman board, Gupta also was a director at P&G.

Gupta, 63, has denied the charges, which include five counts of securities fraud and one count of conspiracy. He says he lost money investing with Rajaratnam and that as many as four other Goldman personnel could have tipped off Galleon. Gupta could face up to 25 years in prison if convicted of securities fraud.

Rajaratnam is serving an 11-year prison term, the longest sentence handed down for insider trading in the United States, after being convicted in the same court a year ago. Much of the evidence against him was gathered in FBI wiretaps, revealing a network of contacts providing inside information.

“It appears that the government seeks to reprise the Rajaratnam trial in order to shore up its weak circumstantial case against Mr. Gupta, resorting to evidence about other companies and other alleged conspiracies,” Gupta’s lawyers said in the court papers.

They said the calls “likely are extremely prejudicial, likely to focus the jury’s attention on matters outside the indictment.”

A spokeswoman for the office of the Manhattan U.S. Attorney declined to comment. The office’s prosecutions of insider trading at hedge funds in recent years have led to dozens of people either pleading guilty or being convicted at trial.

U.S. District Judge Jed Rakoff will rule on which evidence may be heard by the jury.

A pre-trial hearing is scheduled for May 16.

Prosecutors say Gupta gave Rajaratnam advance knowledge of a $5 billion investment in Goldman by Warren Buffett’s Berkshire Hathaway Inc at the height of the 2008 financial crisis, Goldman’s surprise fourth-quarter 2008 loss, and P&G’s quarterly earnings in late January 2009. Gupta was also charged with providing non-public information about Smucker’s acquisition of Folgers from P&G in 2008.

The case is USA v Gupta, U.S. District Court for the Southern District of New York, No. 11-907.

(Reporting By Grant McCool; Editing by Martha Graybow, Dave Zimmerman)

(This story corrects Gupta’s age to 63 in the 4th paragraph)”

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Douglas McNabb – McNabb Associates, P.C.’s
Federal Criminal Defense Attorneys Videos:

Federal Crimes – Be Careful

Federal Crimes – Be Proactive

Federal Crimes – Federal Indictment

Federal Crimes – Detention Hearing

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To find additional federal criminal news, please read Federal Criminal Defense Daily.

Douglas McNabb and other members of the U.S. law firm practice and write and/or report extensively on matters involving Federal Criminal Defense, INTERPOL Red Notice Removal, International Extradition Defense, OFAC SDN Sanctions Removal, International Criminal Court Defense, and US Seizure of Non-Resident, Foreign-Owned Assets. Because we have experience dealing with INTERPOL, our firm understands the inter-relationship that INTERPOL’s “Red Notice” brings to this equation.

The author of this blog is Douglas C. McNabb. Please feel free to contact him directly at mcnabb@mcnabbassociates.com or at one of the offices listed above.