Former McKinsey & Company CEO Rajat Gupta, convicted of three counts of securities fraud and one count of conspiracy related to an insider trading scheme in 2012, is scheduled to be released from federal prison in March 2016. Gupta’s fairly imminent release did not stop him from moving to vacate his conviction, as others have done, under the Second Circuit’s landmark Newman decision. Last week, however, Judge Jed Rakoff of the SDNY ruled that the Newman decision does not apply to the facts in Gupta’s case.
Gupta, who was also on the board of Goldman Sachs, was convicted of conveying material non-public information about Goldman Sachs to Raj Rajaratnam, the head of The Galleon Group hedge fund. Rajaratnam was himself convicted of insider trading based on this information, and sentenced to 11 years in prison. In his motion to vacate his sentence, Gupta argued that his conviction should be thrown out because Newman requires that a tipper such as Gupta “receive from his tippee (Rajaratnam) a quid pro quo in the form of a potential gain of a pecuniary or similarly valuable nature.” Gupta argued that he received no such benefit.
