Galleon Group hedge fund founder Raj Rajaratnam and former Goldman Sachs Group Inc director Rajat Gupta are seeking to overturn penalties imposed against them for insider trading, citing a recent US court decision that narrowed the definition of that offence.
Rajaratnam, who is serving an 11-year prison term, is trying to void a $92.8 million penalty in a US Securities and Exchange Commission civil case, while Gupta wants to throw out his criminal conviction, which led to a two-year prison term, according to court filings late last week.
The men are the highest-profile defendants convicted in a US insider trading crackdown, focused mainly on hedge funds, unveiled in 2009.
Rajaratnam, 57, was convicted of fraud and conspiracy over a variety of trades that prosecutors said generated $63.8 million of illegal profit. Gupta, 66, who is also a former McKinsey & Co global managing director, was convicted of passing tips to Rajaratnam about Goldman's financial results and an investment from Warren Buffett's Berkshire Hathaway Inc.
But in seeking lesser punishments, both men cited a December 10 ruling by the 2nd US Circuit Court of Appeals in New York that overturned two insider trading convictions.
That court said insider trading required knowledge that insiders who passed confidential tips did so in exchange for personal benefits "of some consequence."
In a filing late on Friday night with the 2nd Circuit, Rajaratnam said his criminal case, which was the basis of the SEC penalty, involved several transactions in which he "had no knowledge of a benefit conferred upon the tipper."
Gupta, meanwhile, told his trial judge Jed Rakoff on March 5 that jurors never found that his tips were "part of an agreed upon exchange of tips for consequential benefits, resulting in his conviction for conduct that is not a crime."
Jennifer Queliz, a spokeswoman for US Attorney Preet Bharara in Manhattan, declined to comment. SEC spokesman John Nester also declined to comment.
The cases are SEC v. Rajaratnam, 2nd US Circuit Court of Appeals, No. 11-5124; and US v. Gupta, US District Court, Southern District of New York, No. 11-cr-00907.