By Sharmistha ChakrabortyWASHINGTON, DC: The stage is set for a high-stake legal battle between the US government and Rajat Gupta, one of America’s most respected corporate leaders. The Kolkata-born Gupta, charged with insider trading, has pleaded not guilty and was granted bail after he turned himself in at the office of Federal Bureau of investigation in Manhattan on last Wednesday.
A former Goldman Sachs director and ex-head of the elite consultancy firm McKinsey & Co, Gupta is one of the most prominent business executives to be caught up in the US government’s crackdown on white collar crimes.
The government has accused him of using his position as a power player on Wall Street to share boardroom secrets with billionaire hedge fund manager Raj Rajaratnam. Recently, Rajaratnam, founder of the Galleon Group hedge fund, was sentenced to 11 years in prison, the longest recorded for insider trading. If proven guilty, Gupta may face a similar or longer jail sentence.
The trial is scheduled to begin April 9, 2012. Gupta has pleaded not guilty. His attorney, Gary Naftalis, said that his client did not tip Rajaratnam so that he could trade. According to him, Gupta had legitimate reasons for the conversations including a $10 million investment in one of Galleon Group’s funds.
Legal experts believe that Gupta’s case is not an open-and-shut case, like that of Rajaratnam. “I don’t see any overwhelming evidence,” Robert Heim, a corporate and securities law expert and attorney at Meyers and Heim in New York, told Global India Newswire the day the Indian In many previous cases, the prosecution had access to a lot of wiretapped recordings to make a strong case. Jurors could listen to those tapes which gave them an insight the person’s state of mind and they were able to give a sound judgement. The government may not have that liberty in this case since it does not seem to have tapes of conversations where Gupta is giving tips to him. Apparently, all it has is conversations between Rajaratnam and his employees which indicate that he had been tipped by a director at Goldman Sachs. White collar crime cases often boil down to questions of intent and that can be difficult to prove.
Further, the prosecution will have to give evidence that Gupta received some benefit in return for the information, although the “benefit” is very loosely defined in US law. “The law is complicated and murky. We are not dealing with clear statute,” said Alexandar Cohen, a legal analyst and associate scholar at the Atlas Society, a research and advocacy organization in The indictment refers to Gupta’s long personal relationship with Rajaratnam, including investments they made together. But so far there has been no evidence of personal or financial New Sheriff of Wall Street Preet Bharara, the U.S. Attorney for the Southern District of New York, came to prominence with his recent crackdown on insider trading on Wall Street. He has played rough to prosecute this generation of inside traders. Since he took office in 2009, 56 people have been charged in insider-trading cases, 51 have been convicted and 21 sentenced to prison terms. This includes the successful insider-trading prosecution of Rajaratnam.
His critics claim that Bharara is continuing his winning streak by targeting low level traders and analysts. This may change if he is able to build a strong case against Gupta, now that he has already secured the conviction of Rajaratnam.
In a widely quoted interview with Newsweek, Rajaratnam said that the prosecution was ready to reduce his jail sentence if he agreed to wear a wire and tape his conversations with Gupta.
He refused. But it does suggest that prosecutors are attempting to move to the next level from small-time Wall Street traders to hi-flying corporate leaders.
While the case against Rajat Gupta is weak, it is possible that the prosecution might ride on the pervading anger against Wall Street. Bharara has acknowledged that the financial meltdown plays a part in what motivates him.
At a time when millions of Americans are out of job and anti-Wall Street sentiments are on the rise, it may not be impossible for the Justice Department to get a conviction from a jury trial. The US Congress and members of the public want to penalize the head-honchos who are responsible for the financial mess. In absence of the real culprit, they may just settle for Gupta.
Risks are equally high for Gupta’s defense. His lawyer said that his client was an “innocent man and that he acted with honesty and integrity.” Gupta would have to demonstrate that he trusted Rajaratnam to keep the confidential information to himself by showing a history of such “harmless” exchanges with him. That might not go very well in a jury trial. On top of that, Gupta would also have to show that he did not make any material or non-material gains by passing on such information.
Until now, the prosecution has had an unbroken streak in proving defendants’ guilt in the insider trading trials. Gupta’ case will tell whether the government can hold that winning streak or not. Between now and next April, when the trial begins, we’ll just have to wait and watch if any other evidence surfaces. As of now, however, it seems that the government is simply playing dice on the jury outcome. (Global India Newswire)