Rajat Gupta: My Buddy Raj is a Big, Fat Liar*

All things considered, Rajat Gupta would still prefer not to go to jail.
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All things considered, Rajat Gupta would still prefer not to go to jail.

Rajat Gupta, a former Goldman Sachs board member, has asked a federal appeals court to reverse his conviction on insider trading charges, arguing that a judge made a series of incorrect rulings during his trial.

“This court should reverse the convictions in view of the court’s serious evidentiary errors, which decisively tipped the scales in this case,” wrote Mr. Gupta’s lawyers in its brief to the United States Court of Appeals for the Second Circuit in Manhattan, which was filed late Friday.

As with the other appeals in this recurring series, the former McKinsey & Co. chief's lawyers don't think that the wiretaps used by prosecutors during the trial were kosher, even though every other trial judge who's presided over an insider-trading case agrees that they are. Raj Rajaratnam, whom Gupta is accused of tipping, has made the same argument before the same court; said court has yet to rule.

On the other hand, Gupta's lawyers have one weapon at their disposal that Rajaratnam's don't: that RajRaj is a lying liar who lied even to his own eventual detriment about having insider information.

On one wiretap – perhaps the most damning piece of evidence presented at trial – Mr. Rajaratnam tells a colleague, “I heard yesterday from somebody who’s on the board of Goldman Sachs that they are going to lose $2 per share.”

Mr. Gupta’s lawyers argued that Mr. Rajaratnam’s statement is the unreliable hearsay testimony “of a known fabulist.”

“Without a proper basis for admission, these untestable, unreliable hearsay statements had no place in a criminal trial, and their admission alone compels reversal,” Mr. Gupta’s lawyers wrote.

Rajat Gupta Seeks Reversal of Insider Trading Conviction [DealBook]
Rajat Gupta seeks insider trading conviction reversal [Reuters]

* At least two of these descriptors is inarguably accurate.

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The Universe Has Good News And Less Good News For Rajat Gupta

The less good news is that a jury found the former McKinsey executive guilty on three counts of securities fraud and one count of conspiracy for passing material non-public information to his friend*, convicted insider trader Raj Rajaratnam. The good news: 1. Rajat could go to jail for twenty years but probably won't ("Gupta faces up to 20 years in prison on each of the fraud charges and up to five years for the conspiracy charge. But his sentence is likely to be significantly lower under federal guidelines.") 2. Sentencing is scheduled for October 18 so he's got the whole summer and then some into a Zen place about going to prison. Also! Plenty of time to do all those things he was too busy for when he was working. This is gonna be his time. Time to taste the fruits and let the juices drip down his chin. The summer of Rajat! Gupta Found Guilty Of Insider Trading [WSJ] *Friend Rajat's ass.

Rajat Gupta's Lawyers May Try The "Everybody Was Doing It" Defense

There is much to like in this morning's Journal article about the Rajat Gupta insider trading prosecution, including a nice illustration of how the inside information that Gupta allegedly passed to Raj Rajaratnam actually seems to have been out in the market already. But let's start with the transcript of the call between Raj Rajaratnam and his trader Ian Horowitz, which the Journal has redacted not for confidentiality but for saltiness: Just so you can see Raj Rajaratnam saying "fuck" a lot, the full transcript of that call is here. But, anyway, the Journal story:

Rajat Gupta Defense Team: You Think Our Client Would Pass Inside Information To A Guy Who Didn't Even Have The Decency To Invite Him To His Birthday Party?

What motivates people to share material non-public information with a person they know will use it for profit? For some, it's simply about greed. For others, it's about the thrill. For yet others, it's about pillow talk. For Rajat Gupta, the McKinsey director currently on trial for allegedly passing inside information to Raj Rajaratnam, it's about friendship, according to prosecutors who are trying to make the case that Raj and Rajat were the best of buds and that's what buds do. They they back each other up when they drunkenly hit on the girlfriend of the wrong guy at the bar, they stand up as best men at each others' weddings, they pick up the phone and say "Buy GS" when they know for a fact Warren Buffett is about to do so, too. And although attorneys representing Gupta don't deny the two were thick as thieves, they argue that while perhaps back in the day Rajat would have provided useful information to Raj, there is no way he would have done so after Big R twice violated the bonds of friendship. In the first instance, there was this: Defense attorneys have argued that Messrs. Gupta and Rajaratnam had a falling out in fall 2008 after Mr. Gupta lost his entire $10 million investment in a fund managed by Mr. Rajaratnam and therefore wouldn't have passed along inside information...The precise timing of their relationship's deterioration could be crucial in proving Mr. Gupta's guilt or raising doubts in the minds of jurors about whether he conspired to commit securities fraud...Defense attorneys have said Mr. Gupta was furious at Mr. Rajaratnam in the fall of 2008, when Mr. Gupta's $10 million investment in a fund called Voyager Capital Partners Ltd. evaporated. According to Mr. Kumar's testimony, Mr. Gupta felt Mr. Rajaratnam's negligence had allowed Voyager to collapse. And then this happened: