Former McKinsey & Co. chief Rajat Gupta's lawyers asked a federal appeals court to do what no other judges have done yet: find wiretap evidence inadmissible in an insider-trading case.
The U.S. Second Circuit Court of Appeals heard arguments on Gupta's request to have his conviction thrown out, with the Raj Rajaratnam tipster's team arguing that the wiretaps, on which Gupta is not heard himself, should not have been admitted at last year's trial. Gupta was convicted of passing tips about two companies on whose boards he served, Goldman Sachs and Procter & Gamble, to the Galleon Group founder and was sentenced to two years in prison.
Gupta's lawyer, Seth Waxman, sought to cast doubt on some of the prosecution's best evidence, a phone call—not recorded—by Gupta to Rajaratnam immediately after a Goldman board conference call, at which an investment by Warren Buffett was discussed. One wiretap, soon after that call, shows Rajaratnam telling a Galleon trader that he received a tip that "something good might happen to Goldman."
"In a life full of board meetings, he came out of meetings and returned calls," Waxman said.
The three-judge panel didn't seem convinced.
"Are you telling us that's a coincidence?" U.S. Circuit Judge Jon Newman said.
But another judge on the panel seemed to question whether one call, between Rajaratnam and a Galleon trader, should have been admitted. After prosecutor Richard Tarlowe said that Rajaratnam was "sharing with Lau significant information that the public doesn't have," U.S. Circuit Judge Rosemary Pooler dismissed him, saying, "I didn't see that in the conversation."
A different panel of the same court is considering a similar appeal by Rajaratnam, but has not ruled.