Non-profit is focused on helping rural communities in India.
Even as philanthropist and former board member at Goldman Sachs and Procter & Gamble, and McKinsey head Rajat Gupta has been appointed Chairman of the non-profit Wheels Global Foundation (WGF) – which focuses on helping rural communities in India – he has a tough task to try get his insider trading conviction overturned, for which he has already served prison time.
Gupta’s second chance to upend his insider trading conviction for tipping Galleon Group hedge fund founder Raj Rajaratnam ran into trouble last week at the U.S. Court of Appeals for the Second Circuit, reported the New York Law Journal.
Defense lawyer Gary Naftalis’ attempt to employ an important circuit decision raising the bar for insider trading prosecutions was met with a series of skeptical questions from Judges Christopher Droney, Amalya Kearse and Richard Wesley—especially Wesley.
Naftalis wanted the panel to agree that trial judge Jed Rakoff gave a flawed jury instruction to the Gupta jury under the circuit’s 2014 ruling in the case of United States v. Newman.
In Newman, the court threw out the convictions of two hedge fund managers in a decision that also undermined convictions in other cases, including ones in which the defendants had already pleaded guilty. The Newman court said there must be knowledge that the tipper is receiving a meaningful benefit for the tip and the benefit is “a potential gain of a pecuniary or similarly valuable nature.”
Gupta, 67, was convicted of tipping Rajaratnam from his perches as a board member at Goldman Sachs and Procter & Gamble. His first appeal was rejected and he served 19 months behind bars; he is now trying to vacate the conviction and clear his name by arguing there was no quid pro quo with Rajaratnam and no personal benefit under Newman.
Wesley went right after Naftalis at the start Wednesday, asking why the court shouldn’t refrain from acting until the Supreme Court decides the just-heard case of Salman v. United States, 15-628, a Ninth Circuit case where the definition of personal benefit is at issue, reportd the New York Law Journal.
Wesley then asked whether the benefit existed anyway, as Gupta had invested with Rajaratnam in the past.
“Doesn’t that seem like Gupta [would] have some understanding that if he did something good for Mr. Rajaratnam, he would benefit?” Wesley asked.
Naftalis, of Kramer Levin Naftalis & Frankel, told the court: “What is critical here is he [Gupta] never made a dime in the fall of 2008. The test is whether the insider will personally benefit,” he said, for if there is no gain “there has been no breach of fiduciary duty.”
Assistant U.S. Attorney Damian Williams disagreed, saying the evidence was clear that Gupta had an ongoing business relationship with Rajaratnam that didn’t implicate the Newman ruling. Gupta, he said, was seeking help in recouping $10 million he lost in a fund with Rajaratnam, now serving an 11-year prison term.
“He was intent on getting his money back by hook or crook,” Williams said, adding that Rakoff had found that a July 2008 wiretapped conversation about the losing fund between the two provided a clear “window into their business relationship.”
“He wanted the billionaire hedge fund [operator] to make him whole,” Williams said. “That is the motive to tip and why he continued to tip.”
Naftalis said the problem was the Rakoff instruction to the jury, who were told there doesn’t have to be a direct financial payoff.
Gupta, meanwhile is trying to put his life back together, helming WGF, which was founded in 2013 by a group of alumni from IIT, all prominent entrepreneurs and financial executives. The nonprofit is focused on applying technology to uplift rural communities and provide technological solutions to global challenges.
Gupta’s name appears under the list of WGF’s Board of Directors with the title of Chairman on WGF’s web page. According to his profile on the WGF website, he “serves on its board as a key strategist in defining direction and focus of the non-profit organization.” It said Gupta brings his “considerable skills to WGF, along with his leadership associations and advisory roles to many other non-profits such as the Bill & Melinda Gates Foundation and The Global Fund to Fight AIDS, Tuberculosis and Malaria.”