India-born former Goldman Sachs director Rajat Gupta seeking to set aside his conviction on insider trading charges has said his friendship with jailed hedge fund founder Raj Rajaratnam does not prove he received personal gain by passing on classified information.
The IIT and Harvard-educated 66-year-old former McKinsey head – currently serving a two-year jail term on insider trading charges – filed a reply in federal court here last week in support of his motion to vacate his sentence, set aside the judgement against him and discharge him from prison.
Citing the recent ruling by an appeals court, Gupta said his conviction on insider trading charges “cannot stand” as the government prosecuted him on the basis of his friendship with billionaire Rajaratnam that does not prove he received personal gain in return for passing confidential information.
In the landmark ruling in which it reversed convictions of hedge-fund managers Todd Newman and Anthony Chiasson, the Second Circuit court of appeals said that for an insider trading conviction, prosecutors must show that a defendant received a personal benefit for passing illegal tips.
“As this Court has noted, not every disclosure of corporate information violates the criminal insider trading laws,” Gupta’s lawyers said in court papers.
The lawyers argued that the proof presented at trial of a relationship between Gupta and Rajaratnam does not amount to “proof beyond a reasonable doubt of a quid pro quo agreement” as required by the Newman ruling, and “therefore, Gupta is actually innocent”.
The “prior, looser standard, including such ephemera as maintaining a friendship or ‘good relationship’, is gone. The government tried this case on that prior basis. Gupta was convicted on that prior basis. His conviction cannot stand,” they said.
They argued there is no basis to conclude that a “properly instructed, rational jury would have found” that Gupta received a personal benefit in exchange for the tips of which he was convicted.
The lawyers said that the government falsely equated Gupta’s supposed incentive to recoup his losses on the Voyager investment with Rajaratnam with the “required quid pro quo (for which there was no evidence, and no argument at trial) only serves to illustrate that the instructional error at Gupta’s trial ‘had a substantial and injurious effect or influence in determining the jury’s verdict’”.
Gupta was fined $5 million besides the two-year prison term.