Ha ha. Looks like I was right. Gupta wasn’t convicted for anything he is alleged to have done at Procter and Gamble. Nope. Nor is it for the audit committee call. It’s for the leak of the Warren Buffett investment in Goldman. Like Buffett’s investment wasn’t the insider deal to end all insider deals.
For some strange (NOT) reason, that’s what got the jury to convict. Maybe, it sounded more nefarious. Personally, I don’t find it plausible that that was a tip.
He wouldn’t have waited to tell it to Raj just minutes before closing, when there was a good chance a trade wouldn’t go through. He would have rushed and called it in earlier in the last ten minutes….if he did call it in.
Remember the Jury did not hear the tapes of Loeb and King leaking. I suspect it was Loeb who called that in and then set Gupta up. Loeb had plenty of ties with hedge-funds and was tipping them too.
So this will go to appeal. Judge Rakoff has done some strange things in this case, and some people think he’s a grand-stander.
I have my own thoughts about that, but I’m a bit tired and upset by all this.
No love for Obama donors, Clinton buddies, or people who get sweetheart deals on public land in India. But that’s beside the point. You can’t convict people on criminal charges because you don’t like their politics, or how much money they had, or the fact that someone traded after talking to them. It was ALL circumstantial evidence and the defense never even got to present its side fully.
Did Gupta even know that Raj was trading immediately after talking to him?
I think this is why the founders wanted a trial to be with a jury of your peers. Then no racial and class elements get into the judgement.
And what’s with Preet Bharara? He’s supposed to be such an impeccable figure. He gloats about how Gupta is going to be spending time in a small cell? This is a federal prosecutor?
“So he’s off the hook for his work at P&G, with the lesson perhaps being that people will believe much more nefarious things about Goldman than they will about Procter & Gamble. More amazingly, the jury decided that he did not leak confidential information from the 2007 Goldman audit committee call that he seems to have conferenced Raj Rajaratnam into; perhaps they bought the defense that he was having an unrelated conversation with Rajaratnam during the entire duration of the Goldman call.
On the other hand, he was convicted of leaking Warren Buffett’s investment in Goldman in September 2008, which prosecutors claim made Rajaratnam $840,000 in illegal profits, and of leaking Goldman’s Q3 results in October 2008, which allowed Rajaratnam to avoid “several million dollars” in losses by selling 150,000 shares before those results were announced. You can argue – and the lawyers will! – over how much that was, but if you take the dumb math of (1) Raj sold at around $100 (actually ranging from $97.74 to $102.17) on October 24 and (2) GS closed at $76 on December 16, when Q3 results were announced,* then Raj saved some $3.6 million on that trade. (The government thinks it’s $3.8mm.) The acquitted trades were smaller: the March board call seems to have made Rajaratnam about $700K (350,000 shares with a $2 one-day pop on the news), while Raj’s shorts on P&G made him about $470K.
I suppose it’s nice that the jury threw him a bone on a few counts, and it might even help his bottom line. As we’ve discussed, the main thing that factors in to his sentence is how much money was involved. For Raj, not for him. There is a way in which this makes sense for certain financial crimes: for Allen Stanford and Bernie Madoff, each dollar that they made really was stolen from widows and orphans, and the bigger the theft the more harm they caused. For Raj Rajaratnam, the harm is more attenuated – nobody lost their life’s savings because they sold GS shares at market prices to him rather than to someone else – but there’s still some reason for a correspondence between size of profits and size of jail term, at least for deterrence purposes. I wouldn’t spend a night in jail to make $10, but for $10 million, I’d think about it – but not 11 years in jail. That theory breaks down for tippers like Gupta, who I guess the jury concluded knew that Rajaratnam was trading on his tips, but who could hardly have known how much he was trading. Nonetheless his time is going to be determined primarily by Rajaratnam’s trading decisions, rather than anything that he did or didn’t do.”