Rajat Gupta's Cert. Petition on Insider Trading Conviction Denied

Buried among the dozens of denials of petitions for writs of certiorari was this one: docket number 14-534, Rajat K. Gupta v. United States. It appears to be the end of the road for Gupta, a former Goldman Sachs director convicted for insider trading in hedge funds.

Why Can't We Be Friends?

Gupta's 2012 conviction also implicated another prominent hedge fund manager, Raj Rajaratnam, the founder of a hedge funder company called Galleon Group. Gupta apparently leaked information about Goldman's finances to Rajaratnam, reported Reuters, and Rajaratnam traded on that information.

The scheme earned Rajaratnam an 11-year prison sentence and Gupta a two-year sentence along with $6 million in restitution and a $5 million fine.

At the Supreme Court, Gupta was represented by former solicitor general Seth Waxman (now of WilmerHale), who argued in the cert. petition that the federal trial court should have allowed Gupta's proposed jury instruction that evidence of his good character could by itself raise reasonable doubt.

He also objected to the trial court's exclusion of evidence showing that he lacked a motive to commit the offense. The prosecution's theory of the case, according to Gupta, was that Gupta benefited from the insider information because he was "keep[ing] Rajaratnam, his Voyager co-investor, happy by providing him with material nonpublic information." Gupta, on the other hand, sought to demonstrate that he wasn't on friendly terms with Rajaratnam before the tipping took place, ostensibly because "Rajaratnam had gone behind his back to take money out of the Voyager account."

There Are Some More Tricks Up His Sleeve

After a conviction and an unsuccessful appeal to the Second Circuit, the Supreme Court was Gupta's last chance.

Well, maybe.

Last year, the Second Circuit reversed insider trading convictions for Todd Newman and Anthony Chiasson on the theory that "simple friendship" wasn't enough of a benefit to establish insider trading liability; instead, the prosecution must show a "meaningfully close personal relationship" that results in something of value.

Gupta is currently arguing that his conviction must be set aside under Newman, and that issue itself may give rise to a host of other appeals. For now, though, Gupta is out of luck.

Related Resources:

• Appeals Court Deals Setback to Crackdown on Insider Trading (The New York Times)
• A Taste of the Many Amicus Briefs in the Same-Sex Marriage Case (FindLaw's U.S. Supreme Court Blog)
• Former U. Va. Student Is Petitioning Supreme Court (FindLaw's U.S. Supreme Court Blog)