The trial of Rajat Gupta may look to some like a slam-dunk. Gupta is charged with conspiracy and securities fraud for being what the U.S. government calls the "illegal eyes and ears" for his friend Raj Rajaratnam, who is now serving 11 years for insider trading.
Prosecutors say Gupta fed Rajaratnam secrets on Goldman Sachs and Proctor & Gamble, where Gupta served as director, on four events significant to the markets. There were lots of phone calls between the two friends, and lots of subsequent trading at Galleon, Rajaratnam's firm. But the defense has some arguments that could add up to reasonable doubt.
NetNet spoke with Richard Roth, founder and white-collar criminal defense attorney at the Roth Law Firm. Roth says the Gupta defense has some arguments that could add up to reasonable doubt.
LRS: Will the defense argue that there is no evidence of Gupta receiving monetary benefits?
Roth: If you're not benefiting, it goes against motive. He knows it's criminal so why would he do it if he doesn't need the money ? If the prosecution can't show motive, the jury will have a hard time concluding he's guilty.
There was a witness who testified he had an interest in Galleon, but they didn't show any direct benefit.
You follow the money in these cases, and there's no money to follow here. So the jurors will ask themselves, why would he do this?
LRS: You say they will also argue that there is no evidence of Rajaratnam having traded on information given by Gupta?
Roth: There are circumstantial connections. There are meetings with GS, then calls to Raj. So the defense will try to muddy the course of events. They don't have the connection, the causal link, that Gupta called Raj to give him the information learned at the meetings. The calls were followed by trading at Galleon, but the defense will argue that there's no causal connection.
LRS: And there are too many possible sources of information?
Roth: The defense will show that the info could have come from a number of sources. Lawyers were involved, accountants were involved.
Look at P&G's Folgers coffee business being sold to Smuckers. The defense will show there were multiple law firms, multiple investment banks, multiple employees. The information didn't necessarily have to come from Gupta.
The defense will also show unusual price movements in the stocks involved. Which may have given a reason to Galleon to trade those stocks.
Galleon was flush with all kinds of sources. Some were illicit, as we learned from the Rajaratnam trial, where we also learned that the sources were numerous.
LRS: Can the defense overcome the weight the jury might give to Lloyd Blankfein testifying for the prosecution?
Roth: My guess is he'll testify as to what was said at the board meetings. No one will dispute that. But the defense will dispute that Gupta is the one that told Rajaratnam.
LRS: Will the defense have an easier time with testimony from witnesses who themselves have pleaded guilty to crimes?
Roth: Not only have witnesses pleaded guilty to crimes, they pleaded guilty to this exact same thing - trading in inside information. It gives the defense great pickings for cross examination. And there are so many convicted felons — who is the jury to believe? The information could have come from one of these guys. The question is: can the prosecution pin that tail on Gupta?
LRS: Judge Rakoff even said something like "this isn't one bad apple, this is a bushel."
Roth: Yes, and if I'm summing up, I can say, Who do you want to believe? Which one of these guys who pleaded guilty do you want to believe? Which definitely dilutes the prosecution arguments.
Prosecutors have an early edge, but there should be a slew of evidence that could and should muddy the waters for convicting Gupta.
Written by Linda R. Sittenfeld, CNBC Senior Producer
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