* U.S. says Rajat Gupta passed Goldman tips to Rajaratnam
* Gupta may appeal, faces two-year prison term
(Adds Gupta lawyer, details from decision, background)
By Jonathan Stempel
NEW YORK, March 25 A federal appeals court
upheld the conviction of former Goldman Sachs Group Inc
director Rajat Gupta, one of the biggest successes in federal
prosecutors' long-running probe to stop insider trading on Wall
The 2nd U.S. Circuit Court of Appeals rejected Gupta's claim
that wiretap evidence should not have been admitted to show that
he leaked news about Goldman's finances, including a crucial
investment by Warren Buffett's Berkshire Hathaway Inc,
by phone to Galleon Group hedge fund founder Raj Rajaratnam.
Circuit Judge Amalya Kearse said the timing of Gupta's
calls, coming just one minute after he learned "extraordinary"
news about Goldman's finances, followed by Rajaratnam's fast and
large trades in Goldman shares, were "powerful evidence that
Rajaratnam was given the confidential information by Gupta."
Tuesday's decision upholding Gupta's conviction and two-year
prison term for securities fraud and conspiracy was a fresh
endorsement of the aggressive tactics that prosecutors have used
to thwart insider trading, in a probe unveiled in October 2009.
Gupta, 65, is a former global managing director of the
consulting firm McKinsey & Co, and the top corporate official
convicted in the probe.
The government has won 79 convictions and guilty pleas in
its probe, much of which has focused on hedge funds.
Those convicted include Rajaratnam, as well as two portfolio
managers for billionaire Steven Cohen's SAC Capital Advisors LP,
Mathew Martoma and Michael Steinberg. SAC pleaded guilty to
fraud in November. Cohen has not been criminally charged.
"We're very disappointed in today's decision, believe Mr.
Gupta is entitled to a new trial, and are closely reviewing the
opinion with an eye toward further review," Gupta's lawyer Seth
Waxman, a WilmerHale partner and former U.S. solicitor general
under President Bill Clinton, said in an email.
A spokeswoman for U.S. Attorney Preet Bharara in Manhattan
declined to comment.
Gupta was appealing his June 2012 conviction, prison term
and $5 million fine for feeding tips from Goldman board meetings
in the second half of 2008 to Rajaratnam, his longtime friend.
These tips included information on Goldman's financial
results, as well as a $5 billion investment from Berkshire at
the height of the financial crisis, according to prosecutors.
"SOMETHING GOOD MIGHT HAPPEN TO GOLDMAN"
Rajaratnam was heard telling a trader that a caller had told
him not long before the Berkshire investment was announced on
Sept. 23, 2008 that "something good might happen to Goldman."
Prosecutors contended that Gupta was the caller, and had
contacted Rajaratnam just after emerging from a Goldman board
meeting to approve the Berkshire investment.
Rajaratnam bought more than $33 million of Goldman stock in
the final minutes prior to the market close, before the
Berkshire investment was made public, and reaped a profit
exceeding $1 million, prosecutors said.
Writing for a three-judge appeals court panel, Kearse said
in a 48-page decision that there was "ample evidence" to support
a finding by jurors that Gupta conspired to pass confidential
tips about Goldman to Rajaratnam.
She rejected Gupta's argument that U.S. District Judge Jed
Rakoff in Manhattan, the trial judge, wrongly excluded evidence
that Rajaratnam was cheating Gupta on an investment, and that
Gupta had "integrity" and "obeys the law."
Gupta has been free during his appeal, and it was not
immediately clear when he might begin his prison term.
He is separately appealing Rakoff's Feb. 2013 order that he
reimburse $6.22 million to Goldman to help the bank cover its
legal costs. Goldman was not implicated in wrongdoing.
The government's case against Rajaratnam also relied heavily
on wiretap evidence, which prior to the insider probe was more
commonly associated with efforts to fight organized crime.
Rajaratnam is serving an 11-year prison term. Last June, the
2nd Circuit upheld his conviction, saying the use of wiretaps
was proper. Rajaratnam has appealed to the U.S. Supreme Court.
The case is U.S. v. Gupta, 2nd U.S. Circuit Court of
Appeals, No. 12-4448.
(Additional reporting by Nate Raymond in New York; Editing by
Matthew Lewis and Andrew Hay)