The Gupta-Rajaratnam tapes

By Felix Salmon
March 7, 2011
this on Friday:

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I missed this on Friday:

Prosecutors intend to introduce audiotapes showing that Rajaratnam got inside tips from his friend Rajat Gupta…

Prosectors’ use of wiretaps has been a hallmark of the U.S. hedge fund insider-trading probe, which has resulted in more than two dozen arrests and at least 19 guilty pleas.

Rajaratnam is the central figure in the probe. Prosecutors have said they may present 173 intercepted phone conversations as evidence in the trial.

I find this fascinating, because there’s no indication in the complaint that the phone conversations were recorded at all. There’s lots of information which could have been obtained from phone-company records, about exactly when phone calls were made, what phones they were made from, and how long they lasted. But the big weakness of the complaint seemed to be that it included nothing about the contents of those calls.

Prosecutors of course don’t need to lay out their hand in full when they file their complaint — but if they’re going to come out a few days later and say they have wiretaps, what’s the purpose in keeping that information secret?

It’s possible, I suppose, that those 173 intercepted phone conversations don’t include any of the calls from Gupta, but I doubt it. It’s almost as if the Gupta investigation took place entirely separately from the Rajaratnam investigation, and that only after Gupta was charged could his investigators have access to the Rajaratnam tapes. In any case, it’s all a little odd, to say the least.


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There are several reasons why prosecutors generally withhold at least some incriminating evidence. If you think there is room for negotiation and plea bargaining you don’t lay everything you have on the table. Not giving the exact contents is a way of keeping your cards close to the vest in order to maximize your leverage and minimize the time the defendant has to make up excuses for why the conversation didn’t mean what the government thought it did. It also more than likely protects the party who agreed to the tape (if any) from being identifiable, which is much easier to do if the contents of the conversation are included. This means there is less of an opportunity to influence a potential witness.

Posted by rb6 | Report as abusive

It is a little odd, isn’t it.

It is also extremely odd that Rajat Gupta was not criminally charged at all despite the fact that his conduct more egregiously violated the letter and spirit of the insider trading laws than than any other defendant in the probe. Indeed, the conduct of the “expert network” defendants, whom Preet Bharara is trying to put in federal prison for 10-20 years, was child-like in comparison.

It is also odd that Gupta was charged by even the SEC in only an administrative proceeding unlike ALL of the other two-dozen defendants, who were instead charged by the SEC in federal court. As lawyers who work in this area know, an administrative proceeding is the lightest possible thing Robert Khuzami could do to Gupta while still doing “something.” That extraordinarily, inexplicably light treatment was reserved for him and him alone.

Yes, the behavior of Bharara and Khuzami is quite odd. It is odd simply because they are setting the stage to give Gupta, as a member of the protected elite, a pass.

And Bharara and Khuzami will give Gupta a pass because they are quite aware that their future millions in pay-offs from white-shoe law firms (disguised as “compensation” for their inexpert but well-connected representation of future members of the protected elite) depends on it.

Sadly, disgracefully, corruptly odd.

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Posted by traducere romana daneza | Report as abusive