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From Securities Regulation Daily, April 20, 2015

Supreme Court Docket: Rajat Gupta's cert petition in criminal case denied

By Rodney F. Tonkovic, J.D.

The Supreme Court has again denied certiorari to a petition filed by insider trading defendant Rajat K. Gupta. Gupta's petition asked whether:

  • a trial court should instruct the jury that character evidence alone may create a reasonable doubt; and

  • testimony supporting a criminal defendant’s theory that he lacked a motive for committing the charged offense may be excluded as unfairly prejudicial to the prosecution.

Gupta, a former board member of Goldman Sachs and Procter & Gamble, lost in both criminal and civil proceedings in the same court. Today's denial follows the denial of an earlier bid for certiorari challenging the ruling against him in a civil action brought by the SEC (Gupta v. U.S.).

Convicted of insider trading. In 2012, Gupta was sentenced to two years in prison for providing material non-public information about Goldman Sachs to The Galleon Group's Raj Rajaratnam. In March 2014, a Second Circuit panel upheld Gupta's conviction, finding that the district court properly admitted, limited, or excluded wiretap and character evidence. Gupta asked the Second Circuit to let him have a new trial so he could put on a defense free of the evidentiary limits the district court placed on testimony by character witnesses he had called to say that he was unlikely to have risked his directorship at Goldman Sachs by passing confidential information about the investment bank to others. The Second Circuit denied Gupta’s request for a new trial because it found the district court did not abuse its discretion, or that any errors were harmless.

For more background, please see our coverage of the Second Circuit's opinion in the Securities Regulation Daily Wrap up for March 25, 2014.

Character evidence. Gupta's petition pointed to "Gupta's unblemished reputation for honesty" and asserted that appellate courts have reached conflicting decisions on what a jury should be instructed about character evidence under Federal Rule of Evidence 404(a)(2)(A). Gupta believed that the case’s outcome could have favored him, if it had been heard in one of at least three circuits that allow a jury to be instructed that evidence of a defendant's good character may raise a reasonable doubt of guilt. The fundamental question to be put to the jury, the petition said, was whether Gupta, a philanthropist at the pinnacle of his profession, would, for "no tangible benefit," disclose confidential information.

Criminal defense evidence. Gupta similarly asserted that evidence of his belief that Rajaratnam had swindled him before any of the alleged tips were given may have tipped the scales if allowed into evidence. According to Gupta, a court may exclude evidence under Rule 403 only if “its probative value is substantially outweighed by the danger” of unfair prejudice. Gupta contended that evidence that he was swindled was compelling and may have made the difference in this case, while the unfair prejudice posed by this evidence was nil.

Gupta v. SEC. In January, the Court denied certiorari for a petition challenging the ruling in an enforcement action brought by the SEC against Gupta. Here, Gupta asked whether a district court abuses its discretion when its current finding directly contradicts an earlier finding on an identical record in a related case, without providing an explanation (or justification) for the contradiction. Gupta's petition asserted that the Second Circuit's holding allowed the district court to reach conflicting conclusions based on the same record without providing any reasoned explanation.

Read the docket. This case, and others pending before the Court, can be referenced in the latest version of the Supreme Court Docket. Cases are listed separately, along with a brief summary of the questions raised and the status of the appeal.

The case is No. 14-534.

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