Partner and White Collar Defense and Corporate Investigations Team member Jonathan B. New commented on the securities fraud case filed against Rajat Gupta in The Wall Street Journal ("For U.S., an Old Playbook in the Gupta Case") on October 29.
The article explains that federal prosecutors will have to prove one of the biggest insider-trading cases in years by relying on six allegedly profitable tips given by Gupta to Galleon Group founder Raj Rajaratnam, and not wiretaps or emails proving that the defendants leaked confidential information. The prosecutors’ success will depend on circumstantial evidence proving Gupta knew he was passing along tips that Rajaratnam would trade on.
Gupta’s indictment mentions three tips that didn’t come to light at Rajaratnam’s trial that ended with his conviction in May. The information suggesting Gupta was the alleged source had not been disclosed previously.
If prosecutors, lacking direct wiretap evidence identifying Gupta as the source, wanted jurors to hear about Rajaratnam’s statements about having a source at that company, they’d likely have to overcome defense arguments that the information is second or third hand, said New. Some communications are sometimes admissible if they are between co-conspirators in a crime, he continued.