NEW YORK: In a blow to former Goldman Sachs director Rajat Gupta in insider trading case, a US court has rejected his bid and motion to suppress wiretap evidence at his trial and dismiss some criminal counts.
In a ruling on various pre-trial motions, US District Judge Jed Rakoff said secretly recorded telephone calls between Gupta and hedge fund founder Raj Rajaratnam can be played during his trial, scheduled to begin from May 21.
63-year-old Gupta, who has pleaded not guilty to the charges, had sought to suppress the wiretap intercepts and the evidence derived from it from being introduced at his criminal trial.
Rakoff said the telephone conversations that would be played at Gupta’s trial are the same that were used during last year’s trial of Rajaratnam, who is currently serving an 11-year prison sentence after being convicted of insider trading charges.
Rajaratnam too had challenged the use of wiretaps evidence at his trial but the judge overseeing his case had struck down his bid to suppress the wiretaps.
“Gupta offers no arguments different from the arguments considered in the Rajaratnam case. Gupta argues that insider trading is not an offense as to which wiretapping is authorized.
“So long as the Government acts in good faith with respect to informing the Court of the crimes it is investigating and learning of in connection with the wiretaps. the government is free to use evidence obtained from an authorized wiretap in the prosecution of a crime,” Rakoff ruled. . “The simple truth is that, in both this and numerous other cases, insider trading cannot often be detected, let alone successfully prosecuted, without the aid of wiretaps,” Rakoff added.
The judge also denied a bid by Gupta to dismiss or consolidate several criminal counts in the indictment against him.
Gupta had sought dismissal of some securities fraud charges in his superseding indictment saying that they were “unconstitutionally vague”, and had asked that some charges in the indictment be consolidated as they were “multiplicitous.”
Rakoff also ruled that Gupta’s lawyers could depose Goldman Sachs chief executive Lloyd Blankfein and ask him “any and all” questions concerning his pre-deposition meetings with attorneys from the Securities and Exchange Commission and the US Attorney’s Office (USAO).
Blankfein was already expected to be called as a government witness at Gupta’s trial.
Blankfein’s earlier deposition in February had lasted seven hours and Rakoff said Gupta’s lawyers can question him again for an additional two hours.
During the February deposition, Blankfein had been asked by Gupta’s lawyers if he had met with anyone other than his attorneys in connection with preparing for the deposition.
Blankfein had answered that he had met with attorneys from the Securities and Exchange Commission, prosecutors from the United States Attorney’s Office for the Southern District of New York and an agent from the Federal Bureau of Investigation.
Gupta’s attorney asked Blankfein what the SEC and USAO attorneys asked him at these meetings and what documents were showed to him, to which the SEC attorneys objected and directed Blankfein not to answer the questions. In a joint telephone conference with the court held on February 28, Gupta moved to compel Blankfein to answer the questions.
The Court directed Blankfein to answer any questions that Gupta’s lawyers may have about his deposition preparation meetings.
In a separate ruling, Rakoff said federal prosecutors should hand over to Gupta’s lawyers any material from the notes that the Securities and Exchange Commission took during its investigation of a separate civil fraud case against Gupta that could include evidence which might prove Gupta’s innocence.
During the insider trading investigation, the US Attorney’s Office and an attorney from the Securities and Exchange Commission had conducted joint interviews of 44 witnesses.
Separately, the SEC had conducted interviews of two other witnesses.
The court ordered the SEC to turn over to the US Attorney’s office notes relating to the 44 joint witness interviews, and the US attorney’s office in turn has been ordered to review those notes and “promptly disclose” to Gupta any material which could be of significance to him and help his case.
“Gupta finds himself defending not only the SEC enforcement action, but also a parallel criminal proceeding.
The documents Gupta seeks were created in connection with a joint investigation between the SEC and the US Attorney’s Office, and it is for the purpose of preparing for the parallel criminal trial that Gupta has a substantial need for any Brady material,” Rakoff said.
“That separate government agencies having overlapping jurisdiction will cooperate the factual investigation of the same alleged misconduct makes perfect sense but that they can then disclaim such cooperation to avoid their respective discovery obligations makes no sense at all,” Rakoff added. -PTI