New York: India-born former Goldman Sachs director Rajat Gupta, a free man now after a 2-year jail term on insider trading charges, has approached a US court to overturn his conviction, arguing that there is no evidence to show that he "received even a penny" for passing confidential boardroom information to his friend.
In an exhaustive brief filed in the Second Circuit Court of Appeals yesterday, 66-year-old Gupta's team of lawyers argued that the judgement of the Manhattan district court finding Mr Gupta guilty of insider trading "should be reversed" and his "conviction should be vacated."
Mr Gupta's appeal comes on the back of a landmark ruling by the Manhattan appeals court that for an insider trading conviction prosecutors must show that a defendant received a personal benefit for passing illegal tips.
Mr Gupta's lawyers have cited the ruling that led to the reversal of insider convictions of hedge-fund managers Todd Newman and Anthony Chiasson in December 2014.
"As this Court has noted, not every disclosure of corporate information violates the insider trading laws. Given the stakes in a criminal case, and the apparently boundless use being made of the securities laws by prosecutors, this Court in Newman imposed a clear rule: The tip must be shown to have been part of a quid pro quo agreement," the lawyers wrote in the brief.
"Rajat Gupta was severely prejudiced by the erroneous instruction. The government lacked evidence showing Mr Gupta received even a penny from his alleged wrongdoing. There was no quid pro quo," they said.
Mr Gupta was convicted in 2012 of passing confidential boardroom information to now jailed hedge fund founder Raj Rajaratnam.
He walked a free man in March this year after completing his two-year prison term in a Massachusetts facility. He is currently subject to a term of supervised release. His lawyers argue in the court papers that in the wake of the Newman ruling, the "looser standard" that Mr Gupta would have shared confidential company information with Mr Rajaratnam because of a "friendship or good relationship" is no longer valid.
"The government tried this case and the district court instructed the jury on that prior basis. Rajat Gupta was convicted on that prior basis - and served the entirety of his prison sentence for conduct that is not criminal. Accordingly, the judgement of the district court should be reversed, and Mr Gupta's conviction should be vacated," they said.
The lawyers said no "rational" jury would have found Mr Gupta guilty had it been properly instructed that it should take into account the financial benefit Mr Gupta received for tipping Mr Rajaratnam.
Instead the jury was "erroneously" instructed that it should convict Mr Gupta because he would have tipped him since he maintained a good relationship with Mr Rajaratnam.
"...it is clear that the government relied on the 'good relationship' theory of benefit in connection with the alleged fall 2008 tips - the words 'quid pro quo' or 'exchange' were never uttered to the jury - and that the jury convicted based upon the district court's erroneous endorsement of that theory. Mr Gupta was plainly prejudiced," they said.
A New Delhi-based publishing house has said it will release Mr Gupta's "candid, compelling and poignant" memoirs that will tell the story of his "meteoric rise, and an equally dramatic fall and the lessons he learned from this journey - from the hardships of his childhood to his unprecedented success in corporate America and his years in prison."