S.E.C. Told to Share Notes in Insider Trading Case

March 28, 2012

The New York Times on March 27, 2012 released the following:


A federal judge has ordered Securities and Exchange Commission lawyers to turn over their notes to federal prosecutors handling the criminal case against Rajat K. Gupta, a former director of Goldman Sachs.

The ruling was part of a flurry of pretrial orders from Judge Jed S. Rakoff, who is presiding over the case.

Mr. Gupta, who is charged with leaking Goldman’s boardroom secrets to his friend, the convicted hedge fund manager Raj Rajaratnam, is scheduled to go on trial May 21.

Among the more significant orders, Judge Rakoff said federal prosecutors must review the S.E.C.’s notes about 44 interviews of witnesses during its investigation of Mr. Gupta and disclose any exculpatory evidence to the defense. Federal prosecutors in the United States attorney’s office in Manhattan, who jointly conducted the 44 interviews with the S.E.C., argued that they had no obligation to review the S.E.C.’s notes because the two investigations were separate.

Judge Rakoff disagreed with the government’s position.

“That separate government agencies having overlapping jurisdiction will cooperate in the factual investigation of the same alleged misconduct makes perfect sense; but that they can then disclaim such cooperation to avoid their respective discovery obligations makes no sense at all,” Judge Rakoff wrote.

The S.E.C. and the Justice Department have long run parallel investigations, but the line between them can often become blurred. Judge Rakoff noted that there was a constitutional duty for prosecutors to disclose any exculpatory evidence — called Brady material — to the defense, regardless of whether the notes came from the S.E.C.

“To hold that these memoranda were not created as part of a joint factual investigation would make a mockery of the ‘joint investigation’ standard as applied to the defendant’s constitutional right to receive all information the government has available to it that tends to show his innocence,” Judge Rakoff wrote.

In other rulings, Judge Rakoff ordered that Lloyd C. Blankfein, the chief executive of Goldman Sachs, must sit for an additional two hours of depositions to be taken by Mr. Gupta’s lawyers. Mr. Blankfein was deposed for seven hours last month, and is expected to be a witness at Mr. Gupta’s trial.

The dispute over Mr. Blankfein’s testimony arose when, during the February deposition, Mr. Gupta’s lawyer asked Mr. Blankfein whom he had met with to prepare for the deposition. He responded that he had met with both federal prosecutors, S.E.C. lawyers and an F.B.I. agent. When Mr. Gupta’s lawyer asked Mr. Blankfein what the government asked at these meetings, the S.E.C. objected, citing work product protections.

Judge Rakoff ruled that Mr. Blankfein must answer these questions.

“By asking Blankfein what topics he recalls were discussed, what questions he was asked and what documents he was shown, defendants seek to discover how the preparation sessions affected Blankfein’s testimony, and do not demonstrate a mere naked attempt to obtain the S.E.C.’s and the U.S.A.O.’s legal opinions and strategy,” the judge wrote.

Judge Rakoff also issued several rulings that went against Mr. Gupta. He denied his lawyers’ motion to suppress the use of wiretaps at trial and to dismiss three of the counts in the government’s complaint that were claimed to be either vague or duplicative.

On the wiretap issue, Judge Rakoff said: “The simple truth is that, in both this and numerous other cases, insider trading cannot often be detected, let alone successfully prosecuted, without the aid of wiretaps.””


Douglas McNabb – McNabb Associates, P.C.’s
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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 and OFAC SDN Sanctions Removal.

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.

Nine Charged in New Haven with Alleged Narcotics Trafficking

January 3, 2011

David B. Fein, United States Attorney for the District of Connecticut, and Kimberly K. Mertz, Special Agent in Charge of the New Haven Division of the Federal Bureau of Investigation, announced that a federal grand jury sitting in New Haven has returned a seven-count indictment charging nine individuals with narcotics trafficking offenses related to the distribution of cocaine in and around New Haven. The nine men charged in the indictment were previously arrested on federal criminal complaints, and the indictment was returned on December 28.

A criminal complaint bypasses the grand jury process. Meaning, the individual’s Fifth Amendment right to a grand jury indictment is violated. The government may use a criminal complaint in order to obtain an arrest warrant and subsequently proceed with the grand jury process after the arrest, thereby manipulating the system in the government’s favor.

According to court documents and statements made in court, the charges are the result of an FBI Safe Streets Task Force investigation that included the use of court-authorized wiretaps on four telephones. During the course of the investigation, the individuals were recorded on numerous occasions allegedly arranging the purchase and distribution of kilograms of cocaine.

Unfortunately, court-authorized wiretaps are entirely admissible in a court of law. Once the government has secured court-authorization, they are free to record every telephone conversation without ever notifying or issuing a warrant to the individual(s) being recorded.

The indictment charges each of the following eight individuals with conspiracy to distribute, and to possess with the intent to distribute, five or more kilograms of cocaine: Nelson Perez-Guzman, Ceferino Quinones, Manuel Vizcarrando, Nicolas Casanova-DeJesus, Miguel Pizarro, Luvier Calcano, Carlos Dias, Angelo Hernandez. If convicted of this charge, each faces a mandatory minimum term of imprisonment of 10 years, a maximum term of imprisonment of life and a fine up to $4 million.

In addition to the conspiracy charge, Perez-Guzman, Quinones and Vizcarrando are each charged in separate counts of the indictment with possession with intent to distribute 500 grams or more of cocaine.

In another count, Vizcarrando and Rufino Candelario, are charged with possession with intent to distribute 500 grams or more of cocaine.

Casanova-DeJesus is also is charged with one count of possession with intent to distribute cocaine, which carries a maximum term of imprisonment of 20 years.

Finally, the indictment charges Hernandez with conspiring to distribute cocaine while released on bond.

Douglas McNabb and other members of the firm practice and write extensively on matters involving Federal Criminal Defense, Interpol Litigation, International Extradition and OFAC Litigation.

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

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