Crime in the Suites: An Analyis of Current Issues in White Collar Defense
Jun 20
2012

After Gupta’s Insider-Trading Conviction, What’s Next?

Yet another shoe has dropped in the long-running investigation and the series of prosecutions arising from allegations of insider trading in the stocks of Goldman Sachs and other companies. In May 2011, Raj Rajaratnam was convicted of insider trading and ultimately sentenced to 11 years in prison. On June 15, 2012, Rajat Gupta, a former director at Goldman Sachs, was convicted in the U.S. District Court for the Southern District of New York on four of six counts of an indictment that charged him with a conspiracy that included feeding inside tips to Rajaratnam in September and October 2008 about developments at Goldman Sachs.

As with the trial of Rajaratnam, the key pieces of evidence against Gupta appear to have been wiretapped conversations. The four charges on which Gupta was convicted all related to trades in support of which the government presented recorded conversations as evidence (though the government played only three recordings in the Gupta trial). The jury acquitted Gupta of two charges arising from other trades for which the government presented no such evidence. The jury clearly was influenced by hearing Rajaratnam on the recordings referring to his source on the Goldman Sachs board – powerful evidence that gave increased persuasive power to the government’s reliance on phone records showing substantial contacts between the two men.

Rajaratnam has appealed his conviction to the U.S. Court of Appeals for the Second Circuit, and one significant issue he has raised is whether the government improperly sought authority to wiretap the conversations that were the cornerstone of his conviction. That ruling will be very significant, both because a decision in Rajaratnam’s favor is likely to result in a reversal of Gupta’s conviction as well, and because the Second Circuit’s ruling may have a major impact on the future ability of prosecutors to continue to use wiretaps against white-collar targets.

While Gupta is likely to receive a prison sentence for his conviction, it seems likely that he will receive a lower sentence that Rajaratnam, who engaged in the trades in question and reaped the benefits of those trades – estimated at trial to have generated $16 million in gains or in avoided losses from Rajaratnam’s fund. While prosecutors may seek a higher sentence based on acquitted conduct, Gupta’s advisory range calculated under the U.S. Sentencing Guidelines may be as much as eight years in prison. There is also a significant question whether Judge Jed Rakoff, who has expressed frustration with what he calls “the guidelines’ fetish with abstract arithmetic,” will sentence Gupta to a shorter term than the one calculated under the Guidelines.

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About Ifrah Law

Crime in the Suites is authored by the Ifrah Law Firm, a Washington DC-based law firm specializing in the defense of government investigations and litigation. Our client base spans many regulated industries, particularly e-business, e-commerce, government contracts, gaming and healthcare.

Ifrah Law focuses on federal criminal defense, government contract defense and procurement, health care, and financial services litigation and fraud defense. Further, the firm's E-Commerce attorneys and internet marketing attorneys are leaders in internet advertising, data privacy, online fraud and abuse law, iGaming law.

The commentary and cases included in this blog are contributed by founding partner Jeff Ifrah, partners Michelle Cohen and George Calhoun, counsels Jeff Hamlin and Drew Barnholtz, and associates Rachel Hirsch, Nicole Kardell, Steven Eichorn, David Yellin, and Jessica Feil. These posts are edited by Jeff Ifrah. We look forward to hearing your thoughts and comments!

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