NEW YORK — An ex-Goldman Sachs and Procter & Gamble board member was told Thursday that he can't use a court's ruling in another case to nullify his insider-trading conviction.
U.S. District Judge Jed Rakoff in Manhattan rejected Rajat Gupta's request that he be allowed to piggyback on a federal appeals court's ruling that wiped out the insider-trading convictions of two financiers in December. He called the request "both too late and too little."
Gupta, 66, of Westport, Connecticut, is serving a two-year prison term after his 2012 conviction on conspiracy and securities fraud charges. Prosecutors say he fed tips about Goldman to Raj Rajaratnam, a one-time billionaire hedge fund owner who was convicted of insider-trading charges at a separate trial and sentenced to 11 years in prison.
Gupta's lawyers asked Rakoff to throw out his conviction by relying on the reasoning used by the 2nd U.S. Circuit Court of Appeals, which ruled that Anthony Chiasson, of New York, and Todd Newman, of Needham, Massachusetts, were too far removed from secrets to be prosecuted. The 2nd Circuit previously has upheld Gupta's conviction. After entering prison in June 2014, he is scheduled to be released next March.
Rakoff said Gupta's case was quite different from the prosecution of Chiasson and Newman because Gupta was convicted as a person providing secret information illegally rather than someone receiving information far removed from the source.
"As the Supreme Court has repeatedly made clear, a tipper is liable for securities fraud if he takes sensitive market information provided to him in a fiduciary capacity and exploits it for some personal benefit," the judge said.
Rakoff noted the close friendship between Gupta and Rajaratnam and that Gupta, an investor in Rajaratnam's hedge fund, provided his friend with two "momentous" tips: that Warrant Buffet planned to invest $5 billion in Goldman at the height of the 2008 financial crisis and that Goldman would report an unprecedented loss as a public company in its fourth quarter in 2008.
A lawyer for Gupta declined to comment on Rakoff's ruling.