On January 7, 2019, the United States Court of Appeals for the Second Circuit affirmed — for the second time — the insider trading conviction of Rajat Gupta. Gupta v. United States, No. 15-2707 (2d Cir. Jan. 7, 2019). In a collateral attack to his conviction, Gupta argued that the jury instructions in his case were infirm given the Circuit’s decision in United States v. Newman (since abrogated). There, the Circuit held that to the extent a personal benefit may be inferred through a personal relationship between a tipper and tippee, there must be a “meaningfully close personal relationship.”1 The Second Circuit denied Gupta’s appeal on two grounds — that his failure to preserve his objection to the jury instructions was not excused, and that the instructions did not prejudice Gupta.
By way of background, in 2012, Gupta, a former board member of numerous companies, was convicted of various insider trading counts. The charges related to Gupta’s alleged “tips” of inside information obtained from company Board meetings to hedge fund manager Raj Rajaratnam, who separately was convicted of insider trading in 2011.2
This was Gupta’s second appeal to the Second Circuit. In his first appeal, Gupta challenged the admission of wiretapped conversations on evidentiary grounds, along with the exclusion of evidence allegedly supporting his defense. See United States v. Gupta, 747 F.3d 111 (2d Cir. 2014). Although Gupta’s counsel objected to the court’s jury instructions at trial, Gupta did not raise this issue on his direct appeal. The Circuit rejected Gupta’s challenges and affirmed his conviction in all respects.
Following affirmance, Gupta sought to vacate his conviction pursuant to a habeas corpus petition, see 28 U.S.C. § 2255. This challenge was based on the Second Circuit’s subsequent decision in Newman. Specifically, Gupta contended that the jury instructions in his 2012 trial were invalid because they included language that a personal benefit need not be “financial or … tangible in nature” and could be satisfied through “maintaining a good relationship” with the tippee, Rajaratnam. The district court denied the petition in 2015, finding that Gupta procedurally defaulted his claims by failing to challenge the jury instructions on direct appeal and that the instructions were consistent with Newman. United States v. Gupta, 111 F. Supp. 3d 557 (S.D.N.Y. 2015).
The Second Circuit affirmed the district court’s denial of the habeas petition. The Circuit...
