Prosecutors seek 8-10 years jail-term for Rajat Gupta

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New York, Oct 18: Federal prosecutors have sought 8-10 years in jail for Indian-American Goldman Sachs director Rajat Gupta for his "shocking" insider trading crimes even as he pleaded to be spared a prison term and offered to perform community service in Rwanda.

Prosecutors and Gupta's defence team each submitted their sentencing memorandum in US District Court here on Wednesday, a week before US District Judge Jed Rakoff sentences Gupta on insider trading charges.

In a 12-page memorandum, Manhattan's top federal attorney Preet Bharara said a "sentence within the applicable guidelines range of 97 to 121 months imprisonment is appropriate" for Gupta, who repeatedly flouted the law and abused his position of trust and in his "callousness and above-the-law arrogance" committed crimes which were "extraordinarily serious and damaging to the capital markets".

"Gupta's crimes are shocking," Bharara said, arguing that "a significant term of imprisonment is necessary to reflect the seriousness of Gupta's crimes and to deter other corporate insiders in similar positions of trust from stealing corporate secrets and engaging in a crime that has become far too common."

Prosecutors said Goldman Sachs, who was "an identifiable victim of Gupta's criminal conduct," is seeking restitution to the amount of USD 6.8 million, including the fees the company incurred in the course of investigations and legal proceedings as well as a portion of the compensation that Goldman paid to Gupta as a director. They said Gupta should also forfeit USD 1,150,000, which is 10 per cent of the trading gains hedge fund founder Raj Rajaratnam made as a result of Gupta's illegal tips to him.

In his sentencing memorandum, Gupta's lawyer Gary Naftalis sought probation and said his client is ready to perform a "rigorous full-time programme of community service". The offers for community service involve working with homeless and runaway youth as well as "a less orthodox but innovative proposal" of living in the backward districts of Rwanda and working with the local government on health care initiatives with particular focus on HIV/AIDS and malaria and agricultural development.

Naftalis said Gupta's "once sterling reputation, built over decades, has been irreparably shattered and his business and philanthropic accomplishments tainted". Gupta's "monumental fall" is itself severe punishment and courts have previously recognised that "if used wisely, probation is sufficiently serious punishment to satisfy the statutory mandate that the sentence reflect the seriousness of the offence and provide just punishment".

Gupta, 63, is the most high profile Wall Street executive to be convicted in the government's crackdown on insider trading. Rajaratnam is currently serving a 11 year prison term after being convicted last year. Prosecutors argued that while Gupta's criminal conduct appears to be a deviation from an otherwise law-abiding life, his crimes were not an isolated occurrence or a momentary lapse in judgement.

"Indeed, the opposite is true. Gupta repeatedly tipped Rajaratnam with corporate secrets for nearly two years. And the ease with which he disclosed confidential information to Rajaratnam...reflects the total disregard he showed for his fiduciary duties and the callousness with which he handled confidential information," the prosecutors argued.

Gupta was found guilty by a jury in June this year on three counts of securities fraud and one count of conspiracy. The securities fraud carries a maximum prison sentence of 20 years and the conspiracy carries a five-year jail term. Gupta's sentencing comes exactly a year after Bharara filed insider trading charges against the former McKinsey head. Gupta was convicted of leaking board room secrets of Goldman Sachs to Rajaratnam including information about a five billion investment by Warren Buffett's Berkshire Hathaway in Sept 2008 and a tip on a quarterly loss.

The jury had acquitted him of two charges of leaking information that Cincinnati-based P&G's organic sales growth would fall below estimates and tipping Rajaratnam about Goldman Sachs's earnings in the first quarter of 2007.

PTI

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