NPR's Ailsa Chang has a story, Wall Street Wiretaps: Investigators Use Insiders' Own Words To Convict
Them.
(esp)
Tag: Rajaratnam
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The New York Times reported yesterday that Rajat K. Gupta, a former Goldman Sachs director on trial in the Southern District of New York for providing inside information to his friend and business colleague Raj Rajaratnam so that Rajaratnam could make trades based on those tips, will not testify, according to a letter his highly respected lawyer, Gary Naftalis, submitted to the court on Sunday night. See here. The prior Friday, Mr. Naftalis told the court and the prosecutors it was "highly likely" that Mr. Gupta would testify. I was quite surprised by that declaration and even suspected that it might be a feint to divert prosecutorial resources from the preparation of cross-examination of other witnesses and the summation to preparation for the cross-examination of Mr. Gupta. (While I personally have never made such a feint, I have on occasion considered doing it.)
The government's case against Mr. Gupta is a circumstantial one — essentially a pattern of incidents in which Mr. Gupta allegedly received secret information at board meetings and very shortly thereafter telephoned Mr. Rajaratnam, and Mr. Rajaratnam then placed trades based on the matters discussed at the board meeting. Most of the critical evidence — Mr. Gupta's presence at the board meetings at which the information in question was discussed, his calls to Mr. Rajaratnam and Mr. Rajaratnam's firm's trading — are virtually irrefutable. On the other hand, there is no "smoking gun" in the form of testimony or recordings as to what was said in the critical conversations.
On the witness stand, Mr. Gupta would no doubt be thoroughly and harshly cross-examined on whatever explanation he provided about the substance and timing of the phone calls. Interrogation about these repeated events would allow the prosecutors in effect an extra summation to hammer on these facts, indeed perhaps even better than a summation since the defendant would have to respond directly to each of the allegations, whereas in summation an attorney would have the option of ignoring, glossing over or generalizing about all or portions of the evidence.
In any case, white-collar or not, I believe that when a defendant testifies, the standard of proof beyond a reasonable doubt is diluted. Jurors, rather than asking themselves whether the prosecutor has proved the case beyond a reasonable doubt, focus more on whether the defendant probably told the truth.
I would not be surprised if Mr. Gupta's legal team had spent much of this past weekend cross-examining him and trying to convince him that the better choice for him was to decline to testify. The decision whether to testify is one of the very few that virtually all lawyers, and all ethics rules, decree belongs ultimately to the client. It is often difficult to convince white collar clients, especially those whose egos have become enlarged because of their extreme success, that they will be unable to convince a jury.
While my reading leads me to believe that this is a difficult case for the defense, I believe Mr. Gupta's decision not to testify is a correct one. A similar decision seems to have worked for John Edwards.
(goldman)
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The official opening of the 26th Annual ABA White Collar Crime Conference began with opening remarks from Raymond Banoun, chair of the Institute, followed by remarks of the chair-elect of the ABA Criminal Justice Section, William "Bill" Shepherd of Holland & Knight. Shepherd noted how the ABA includes all aspects of criminal justice (prosecutors, judges, and criminal defense lawyers). He encouraged folks to get involved in the section.
The first panel, titled Recent Trials, featured three recent cases: Raj Rajaratnam, Loren Stevens, and the Lee B. Farkus trials.
The moderator, Ronald J. Nessim, took the speakers through several topics, including the Indictment, key pre-trial issues in each case, the media, discovery, proffers, parallel proceedings, joint defense agreements, and the trial.
Discussing the Farkus case, the prosecutor on the case –Charles Connolly-talked about the issue of how do you simplify a complex fraud scheme to make it understandable for the jury, and what schemes do you charge. Professor Bruce Rogow, defense counsel on the Farkus case, responded that the Indictment was too long and too difficult. Sara Bloom, the prosecutor handling the Lauren Stevens case said the indictment was narrowly tailed. Defense Counsel Reid Weingarten responded that he is still astonished that Lauren Stevens was indicted. Jonathan Streeter, prosecutor on the Rajaratnam case, noted that he did not try to include everything in the indictment. Simplification was a key theme throughout his comments on this panel. John M. Dowd, defending Rajaratnam, discussed the bill of particulars. He emphasized that the case was really not about wire fraud, although that was the basis for the wiretap.
The government power in these prosecutions was brought to life in the discussion of the venue issue in the Farkus case and the perp walk in the Rajaratnam case. The audience was clearly perturbed by the use of a perp walk in the Rajaratnam case, where the accused had cooperated for three years, had no record, was arrested in his apartment, handcuffed for some time at the station, and finally paraded in a perp walk. This was described by defense counsel as "toxic and prejudicial" and the audience applause to that statement sounded like there was agreement. Perp walks need to stop.
Interestingly none of the defense counsel expressed major discovery problems in their cases. Connolly, the prosecutor on the Farkus case, noted how they made the sixty million documents available to defense – they made a mirror imagine for defense and set up weekly conference calls with the defense. That said, John M. Dowd pointed out problems with items such as the affidavit for the wiretap and Bruce Rogow discussed problems with respect to cooperation in the Farkus case coming on the eve of trial. He also noted how the inability during trial to go into certain motivations by cooperating witnesses made his case difficult.
Reid Weingarten emphasized that one needs to think carefully before agreeing to a proffer. He noted that once you make a proffer it is problem putting the client on the witness stand.
Sara Bloom and Reid Weingarten briefly discussed how the government refused to waive a jury trial, despite the defense agreeing to do so in the Stevens case. There was also a discussion about joint defense agreements, and John Dowd noted that when you put a joint defense agreement in writing that is the first act of mistrust.
A key word used throughout this panel by the government was simplify – one needs to make a white collar case understandable to the jury.
(esp)(Blogging from Miami)
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Danielle Chiesi, the former beauty queen, hedge fund trader, and fount of inside information to Raj Rajaratnam, was sentenced last week to 30 months in prison. We had blogged about her earlier. (see here)
Ms. Chiesi, who had extracted information from lovers and passed it on to Rajaratnam, was described by United States Attorney Preet Bharara in interesting imagery as "the vital artery through which inside information flowed between captains of industry and billionaire hedge fund managers."
The 30-month sentence was three months greater than that imposed on her former lover and boss, Mark Kurland, whom she blamed for involving her in criminality. Ms. Chiesi had specifically asked for a sentence equal to or lesser than Mr. Kurland’s. The government sought a sentence within the advisory guideline range of 37 to 46 months.
Retaining her sense of style to the end, Ms.Chiesi wore an atypical outfit for a defendant about to be sentenced, a sleeveless pink dress and matching pumps. And, after the sentence, alluding to her early morning arrest, she told the FBI agents at the prosecution table that the next time they knocked on her door they should do it in the afternoon. I suspect that she’ll be up early for the next 30 months.
(Goldman)
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1. The case is not complex, legally or factually. It isn't even interesting, except for John Dowd's Charles Laughton routine. Nor are the issues novel. The evidence against the defendant is overwhelming. The resources spent on the prosecution are wildly out of proportion to the harm caused by insider trading.
2. Contrary to popular myth, fueled by the press, insider trading is not notoriously difficult to prosecute. It is notoriously easy to detect and prosecute. Most people caught at it plead guilty.
3. Nineteen of the 26 charged defendants pled guilty. Tape-recorded conversations establish both insider trading and co-conspirator awareness that insider trading is illegal. This is hardly surprising. There has long been acute awareness of insider trading's illegality within the financial community. That's why people whisper on the telephone, erase emails, hammer up laptops, and go out at 2:00 in the morning to throw away hard drives.
4. The case will not be won because the prosecutors pulled all-nighters in the war room. The case will be won because the prosecutors got a Title III Order and secretly recorded the hell out of everybody.
5. If the government loses this case, the prosecutors should rend their garments and put on sackcloth and ashes. Really. Acquittal will only come through jury nullification or confusion.
6. John Dowd is in the catbird seat. If Rajaratnam is found guilty, it's no big deal, because everyone in the defense bar expects it. If Rajaratnam is acquitted, Dowd is a magician. Meanwhile, Dowd gets to order around seven Akin Gump colleagues and perfect that Charles Laughton imitation. Not a bad gig.
(wisenberg)
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