Will Raj Rajaratnam Testify against Rajat Gupta?
Rajat Gupta’s insider trading trial is proceeding apace in the Southern District of New York. While there have certainly been enough entertaining witnesses to keep close observers busy so far, none would be as Earth-shaking as news of Raj Rajaratnam’s testimony. As you know if you’re reading this post, Rajaratnam was convicted in the same courthouse last year for insider trading in a large number of issuers. Prosecutors are now trying to show that some of Rajaratnam’s inside information came from his longtime friend Rajat Gupta. Some have speculated about the possibility that Rajaratnam might testify against Gupta in his ongoing trial.
And it obviously isn’t a crazy notion to think that he could try to cooperate with the government in a way that would knock some time off his eleven-year sentence. But I suspect it won’t happen. Remember that after his conviction he submitted to a wide-ranging interview with the Daily Beast. In it, he did hint at some feelings of betrayal by Gupta, suggesting that he had donated $1 million to a business school in India at the suggestion of Gupta and Anil Kumar. He said, “I later found out they never contributed any of their money, and are listed as the school’s founders. And I’m not even a f**king Indian.” Kumar, who pled guilty in 2010 for his role in the Galleon insider trading ring, testified against Rajaratnam in his trial. But Gupta didn’t. And Rajaratnam said that despite the government’s efforts, he wouldn’t turn against his friend. The Daily Beast article says:
“”””As late as two weeks before [his] sentencing, Rajaratnam was still being asked by the government to turn on Gupta. But he wouldn’t wear a wire, he says, so he could sleep at night. “Anil Kumar’s son worked at Galleon one summer. I used to vacation with Rajiv Goel’s family. Their families knew my family. You don’t think this is going to haunt these guys? They wanted me to plea-bargain. They want to get Rajat. I am not going to do what people did to me. Rajat has four daughters.”
Rajaratnam’s sentence, while the longest for insider trading ever imposed, probably suggests that he is going to stick to his plans not to point the finger at Gupta. When Judge Holwell gave Rajaratnam that sentence, he left open the real possibility that he could get out of prison at age 65 as a billionaire. He has had to pay a combined $156.6 million in disgorgement and penalties for his criminal and SEC cases, but he has a lot left in the tank. There are worse fates. Not all district judges approach sentencing in a multi-defendant criminal enterprise the same way. Some of them look at a defendant in Rajaratnam’s position – with information about others still to be tried – hand down a sentence of, say, 30 years, and wait to see how strong the defendant’s principles really are. Under Rule 35(b) of the Federal Rules of Criminal Procedure, prosecutors can then move for a reduction in the sentence based on the defendant’s “substantial assistance” to the government. The original sentence is really just a way-station until the defendant testifies against a bigger fish, and the final, “real” sentence is imposed. I suspect we’re not going to get to that point in this trial. Without doing anything, Rajaratnam could reach a place in his life where he is incredibly wealthy and gets to enjoy his grandkids. I bet he does not take the stand and add burdens to his conscience to upset that possibility.