Rajat Gupta has been charged with conspiracy and securities fraud, and has been called “the illegal eyes and ears” for his friend Raj Rajaratnam by the U.S. governemnt. Rajaratnam is currently serving 11 years for insider trading.
When an insider trading case goes through court, The New York Times reports that the U.S. Government must establish that the defendant had motive to commit the crimes they are accused of. So far, the prosecution has done a good job of proving that Gupta was the one who gave Rajaratnam inside information in both Goldman Sachs and Proctor & Gamble, allowing Rajaratnam to trade shares for an investment, however they have yet to show motive for the crime.
The New York Times reporter Peter J. Henning writes of Rajat Gupta’s case that:
“The leading Supreme Court case on insider tipping is Dirks v. S.E.C. In that case, the court said that ‘there may be a relationship between the insider and the recipient that suggests a quid pro quo from the latter, or an intention to benefit the particular recipient,’ which can include ‘a gift of confidential information to a trading relative or friend.’ This essentially requires showing a motive for the tipper to reveal the information that was more than just an inadvertent slip of the tongue.”
With the prosecution set to rest its case on Wednesday or Thursday, according to CNBC, the defense could potentially provide enough reasonable doubt to force the jury into finding Gupta not guilty, simply because, while he did pass inside information to Raj Rajaratnam, he may not have received any benefit in return.
Bloomberg Business Week reports that Goldman Sachs Group Inc. Chief Executive Lloyd C. Blankfein took the stand on Monday to begin his testimony about Rajat Gupta’s presence at board meetings, as well as Goldman Sach’s policies for protecting confidential information.