India-born former Goldman Sachs director Rajat Gupta has asked a US court for a new trial to reverse his conviction on insider trading charges, arguing that the district judge had committed "serious evidentiary errors" that tipped the scales decisively in the case.
In a 72-page brief submitted with the US Court of Appeals for the Second Circuit, Gupta's lawyer Seth Waxman argued that his client is "entitled to a new trial" at which "unreliable hearsay statements are excluded" and the jury "hears the full story of Gupta's defence".
"The Court should reverse the convictions in view of the (district) court's serious evidentiary errors, which decisively tipped the scales in this case," Waxman said.
Gupta, 64, was convicted of passing confidential boardroom information about Goldman Sachs to his friend and business associate Galleon founder Raj Rajaratnam, who is currently serving an 11-year prison term for running one of the biggest insider trading schemes in US history.
The former McKinsey head was sentenced to two years' imprisonment by US District Judge Jed Rakoff in October last year but was last month granted his request to remain free on bail while he fights his conviction.
Waxman said the prosecution's case rested exclusively on circumstantial evidence and predominantly on wiretap statements, which were not made by Gupta but by Rajaratnam, who is a "highly unreliable declarant, speaking with other people with no connection to Gupta".
He said the district court was wrong in admitting the hearsay wiretap statements, which Gupta could not cross-examine given Rajaratnam's unavailability.
"Without a proper basis for admission, these untestable, unreliable hearsay statements had no place in a criminal trial, and their admission alone compels reversal," Waxman said.
"The court's decidedly asymmetrical interpretation of the rules of evidence left the jury with a distorted picture, in which Gupta was accused by the self-serving hearsay of a known fabulist beyond Gupta's power to cross-examine, but was unable to explain to the jury that he had neither the motive nor the inclination to benefit that person, and that there was a plausible alternative perpetrator," Waxman said.
In one of the wiretaps presented at Gupta's trial, Rajaratnam says, "I heard yesterday from somebody who's on the board of Goldman Sachs that they are going to lose USD 2 per share".
Waxman said while the court allowed the use of wiretaps as evidence during the trial, it "significantly curtailed" Gupta's principal defences by barring him from presenting "admissible evidence," which would have shown to the jury his innocence and proved that Gupta had no motive to tip Rajaratnam.
"Gupta was denied the opportunity to present the best evidence of his innocence. The court crippled each of Gupta's three defences —- his state of mind before the tips on which the jury convicted, the existence of a plausible alternative tipper, and his character for integrity -— through erroneous decisions to exclude admissible evidence," Waxman said.
"And even were any of these errors, standing alone, insufficient to warrant reversal, in the aggregate, the district court's errors deprived (Gupta) of a fair trial," he said.
The district court excluded "classic state of mind testimony" from Gupta's eldest daughter Geetanjali that would have shown that Gupta was "furious" at Rajaratnam for cheating him out of millions of dollars through a joint investment fund Voyager, Waxman said.
In a conversation with his daughter on September 20, 2008 — just three days before he supposedly tipped Rajaratnam with information about Goldman and a month before the second tip — Gupta said he was angry at Rajaratnam for cheating him out of 10 million dollars.
Waxman said if Rakoff had allowed that conversation to be presented as evidence, it would have led the jury to question whether Gupta had any motive to tip the man who had stolen millions from him.
The evidence of tipping was entirely circumstantial and indirect, Waxman added.
The court also prohibited Gupta from introducing evidence of a "plausible alternative source" at Goldman for the tips which Rajaratnam received.
Gupta had sought to present evidence that David Loeb, a "highly-placed" Goldman employee, had a history of providing confidential information about companies like Apple and Intel to Rajaratnam.
The court allowed evidence that Loeb called Rajaratnam and his subordinate on the days of the alleged September and October 2008 tips, but excluded evidence that Loeb had repeatedly given Rajaratnam inside information during 2008.
The trial court's rulings denied Gupta a "fundamentally fair ability" to present his defence and "deprived him of a fair trial".
"Rajat Gupta had a right to be tried on the basis of admissible evidence, subject to cross-examination, and to present a complete defence. The district court deprived him of both rights," Waxman said.
Waxman added that since the prosecution did not have any direct evidence of tips from Gupta to Rajaratnam, it sought to establish Gupta's guilt through circumstantial evidence and wiretapped conversations.