Rajat Gupta - born in India, educated at Harvard and well-known in corporate America - surrounded by family members including his four daughters, watched the arguments before leaving the Manhattan courthouse visibly pleased, breaking into a smile as a cameraman positioned himself before him. He was sentenced to two years in prison and fined $5 million in October.
The two-judge panel of the 2nd US Circuit Court of Appeals didn't immediately explain its reasoning for allowing Gupta to be freed on $10 million bail. A lower court judge previously had said he must begin serving his sentence before the appeal is heard.
Circuit Judge Jose A. Cabranes told lawyers for Gupta and the government to be ready to file written arguments within 45 days, indicating the court will hear the appeal on an expedited schedule.
Before Cabranes spoke, Gupta's lawyer Seth Waxman told the judges that the appeal raised significant issues, entitling Gupta to remain free.
Waxman said the trial judge, Jed Rakoff, had refused to let the jury see "classically admissible evidence that went to the very heart of the case." He said the testimony, if permitted at trial, would have countered government's claims that Gupta fed Raj Rajaratnam inside information just seconds after Goldman Sachs' board calls.
The lawyer said Gupta's daughter was not permitted to explain to jurors that her father was angry with Rajaratnam, because Gupta believed the Sri Lanka-born billionaire hedge fund founder had cheated him of $10 million in an investment.
"Mr. Gupta's principle defense was that he never would have provided a benefit on those calls because he had come to believe he had swindled him," Waxman said. "Mr Gupta was enraged to learn that Rajaratnam had cheated him out of millions of dollars."
Assistant US Attorney Reed Brodsky said Gupta was convicted through the use of "direct evidence and powerful circumstantial evidence." He urged the court to force Gupta to serve his sentence before the appeal is heard.
The 64-year-old is the biggest catch yet in the government's five-year crackdown on insider trading that utilised wiretaps and numerous cooperators. The prosecution against Rajaratnam and co-conspirators alone resulted in more than two dozen convictions. Rajaratnam is serving an 11-year prison term after he was convicted at trial last year. Prosecutors said he made as much as $75 million illegally.
At Gupta's trial, the government said Gupta notified Rajaratnam as soon as he learned that Warren Buffett's Berkshire Hathaway planned to invest $5 billion in Goldman in September 2008 at the height of the country's financial crisis. Prosecutors said Gupta told Rajaratnam a month later that Goldman was facing an unexpected quarterly loss before it was announced publicly.