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Media Alerts - United States v. Gupta -- Second Circuit
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March 26, 2014
  United States v. Gupta -- Second Circuit
Headline: Second Circuit Affirms Rajat Gupta's Securities and Conspiracy Convictions

Area of Law: Securities Law

Issue(s) Presented: Whether the district court erred in admitting statements of defendant's coconspirator and excluding evidence offered by the defense.

Brief Summary: Rajat Gupta, formerly a member of the Goldman Sachs Board of Directors, was charged with providing inside information to Raj Rajaratnam knowing that the information would be used to buy and sell securities. A jury in the Southern District of New York convicted Gupta of four of the six counts against him, including conspiracy to commit securities fraud and three substantive counts of fraud. On appeal to the Second Circuit, Gupta contended that the trial court erred by admitting wiretapped conversations to which Gupta was not a party, and by excluding evidence offered by the defense. The Second Circuit rejected these arguments and affirmed the conviction. To read the whole opinion, please visit

Extended Summary: Rajat Gupta, a former member of the Board of Directors of Goldman Sachs, was involved in several financial ventures with Raj Rajaratnam, founder of the Galleon Group, which was the subject of a government investigation of insider trading. This investigation uncovered evidence that Gupta was supplying Rajaratnam with inside information about Goldman Sachs. As a result, Gupta was charged with six counts of securities law violations, on grounds that Gupta, Rajaratnam, and others conspired to commit securities fraud; that Gupta disclosed inside information to Rajaratnam knowing that he would use the information to buy and sell securities.
Gupta was convicted in the United States District Court for the Southern District of New York of securities fraud and conspiracy to commit securities fraud based on insider trading. The majority of the evidence that supported this conviction was circumstantial, consisting of testimony, wiretapped phone calls, and records of phone calls. In his defense, Gupta called witnesses to testify as to his character and introduced evidence suggesting that it was a different Goldman Sachs insider who supplied Rajaratnam with the confidential information.
After being convicted, Gupta was sentenced to 24 months' imprisonment, to be followed by a one year term of supervised release, and was ordered to pay restitution in the amount of $6,218,223.59. On appeal, Gupta argued that Rajaratnam's wiretapped conversations were inadmissible hearsay; that the trial court erred in curtailing evidence proffered by Gupta in his defense; and that the errors, either singly or in combination, entitle him to a new trial. The Second Circuit rejected these arguments and affirmed the District Court's conviction.
Gupta first contended that the wiretap authorizations were obtained in violation of Title III of the Omnibus Crime Control and Safe Streets Act of 1968 and the Fourth Amendment to the Constitution. The Second Circuit, however, rejected these arguments. Secondly, Gupta challenged the admission of the wiretapped conversations between Rajaratnam and other individuals on the grounds that the tapes are hearsay. The Second Circuit found that the lower court had not abused its discretion in finding that the tapes were admissible both as nonhearsay statements in furtherance of the Rajaratnam-Gupta conspiracy and under the exception for statements against penal interest.
Gupta further contended that he was entitled to a new trial on the ground that the district court unduly limited evidence proffered by the defense to show that any communication by Gupta of inside information to Rajaratnam was improbable. The Second Circuit found that the district court did not abuse its discretion in limiting this evidence; rather. the district court made a proper Rule 403 assessment that the evidence, if admitted, would have been unduly prejudicial and confusing to the jury. The court also concluded that if the limitation on the testimony was error, the error was harmless.
Gupta also challenged the lower court's refusal to admit documents that may have shown that another Goldman Sachs employee was responsible for providing Rajaratnam with the inside information, arguing that "the accused may introduce any legal evidence tending to prove that another person may have committed the crime with which the defendant is charged." The lower court had found that the proffered evidence was replete with inadmissible hearsay, suffered from a lack of foundation, and that in the absence of explanatory testimony by a witness the jury would be unable to understand the documents without representations by counsel or speculation, either of which would be improper. The Second Circuit agreed, concluding that the district court did not err in refusing to admit the evidence, especially in light of Gupta's intention to rely solely on the documents themselves, rather than call a witness to lay a foundation for these documents.
The Second Circuit also agreed with the district court's finding that evidence of Gupta's intention to give money to charity was inadmissible hearsay, would be unduly confusing and prejudicial, and its admission unjustified under Rule 106. Moreover, the Second Circuit did not find that the lower court abused its discretion in prohibiting Gupta from questioning witnesses about his "integrity." Lastly, the Second Circuit, again agreeing with the district court, reiterated that it is settled law in the Second Circuit that an instruction that character testimony may by itself raise a reasonable doubt is not required and declined to reconsider that rule.

Panel (if known): Newman, Kearse, and Pooler.

Argument Date: May 21, 2013

Argument Location: New York, NY

Date of Issued Opinion: March 25, 2014

Docket Number: No. 12-4448

Decided: Affirmed

Case Alert Author: Gillian Kirsch

Counsel: Richard C. Tarlowe, Assistant United States Attorney, New York, New York, for Appellee. Seth P. Waxman, Wilmer Cutler Pickering Hale & Dorr, Washington, D.C., for the Defendant-Appellant.

Author of Opinion: Kearse

Circuit: 2nd Circuit

Case Alert Circuit Supervisor: Professor Emily Gold Waldman

    Posted By: Emily Waldman @ 03/26/2014 08:19 AM     2nd Circuit  

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