Bloomberg News

U.S. Defends Use of Wiretap Evidence in Rajat Gupta Prosecution

January 23, 2012

Jan. 20 (Bloomberg) -- U.S. prosecutors opposed a bid by former Goldman Sachs Group Inc. director Rajat Gupta to block use in his criminal case of wiretap evidence obtained from the mobile phone of convicted inside trader Raj Rajaratnam.

Six different judges authorized the wiretaps because they are particularly appropriate in investigating insider trading, which requires communication and is often difficult to detect and prove beyond a reasonable doubt, the government said yesterday in a filing opposing Gupta’s request to suppress the evidence.

“In an effort to suppress incriminating wiretap evidence against him, Gupta has mimicked Rajaratnam’s arguments in Rajaratnam’s failed attempt to suppress the wiretap evidence,” prosecutors said in the filing in federal court in Manhattan.

Gupta, who also sat on the board of Procter & Gamble Co. and led McKinsey & Co., was indicted by a federal grand jury in October on five counts of securities fraud and one count of conspiracy to commit securities fraud for passing inside information to Rajaratnam. Gupta also faces a lawsuit filed by the U.S. Securities and Exchange Commission.

Rajaratnam, the former Galleon Group LLC hedge fund manager, was convicted last year of directing the biggest insider-trading ring in a generation. It was one of the first insider-trading cases in which the government made extensive use of wiretaps.

Gupta’s lawyers said Jan. 3 that the court’s rejection of a similar bid by Rajaratnam to bar the intercepts as evidence during his trial was incorrect. Federal laws restricting use of wiretaps don’t permit them in investigations of suspected insider trading, according to Gupta’s filing.

Gary Naftalis, a lawyer for Gupta, didn’t immediately return a call to his office after regular business hours yesterday seeking comment on the government’s filing.

The case is U.S. v. Gupta, 11-cr-00907, U.S. District Court, Southern District of New York (Manhattan).

--Editors: Peter Blumberg, Michael Hytha

To contact the reporter on this story: Edvard Pettersson in Los Angeles at epettersson@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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