Goldman Sachs’ Raj Gupta Off to a Bad Start in Insider-Trading Trial

If Raj Gupta is ever going to beat the insider-trading rap leveled against him, he’s going to need a stellar defense. U.S. prosecutors are in the lead with two major blows against the former McKinsey & Co. big-wig and Goldman Sachs director, reports The Globe and Mail.

The prosecution gained its early edge when Judge Jed Rakoff allowed them to introduce wiretap evidence, and a week later, signed-off on their version of preliminary jury instruction. Though the prosecution was facing a fairly difficult case, Rakoff’s allowance for the jury to hear recordings of jailed insider-trader Raj Rajaratnam boasting over tips (allegedly) from Goldman’s Gupta. The prosecution continued its winning streak with the jury instruction.

Though it was a simple summary of charges, something that Judge Rakoff typically allows in order to guide jurors through evidence, defense attorneys often argue that jury instruction oversimplifies a case, leading jurors to a guilty verdict without solid proof that a crime has been committed. By allowing jury instruction, Judge Rakoff has already put Gupta at a disadvantage.

For example, Gupta has to be shown to have received benefit from leaking information to Rajaratnam. This is crucial to an insider-trading conviction. The defense wants “benefit” to be clarified as “personal benefit”, because they don’t think that the prosecution can prove Gupta gained a personal benefit from speaking with Rajaratnam. Prosecutors went for “some kind of benefit, directly or indirectly, however modest,” and Judge Rakoff accepted “at least some modest benefit,” which is closer to the prosecution than the defense.

Gupta still does have a chance, as the prosecution doesn’t have evidence that will completely put him away, like they did with Rajaratnam. Gupta also has a spotless reputation, which will aid the defense. It all rests with the jurors, who might be growing skeptical of Gupta with Rakoff’s allowances against him.

Rajaratnam