Charity as a Defense for Alleged Insider Trading?

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May 16, 2012; Source: Wall Street Journal Law Blog

According to Chad Bray at the Wall Street Journal, lawyers representing Rajat Gupta, who will be on trial next week for alleged insider trading, are hoping to present his philanthropic activities as a part of his defense. The lawyers reportedly want to demonstrate that such philanthropy is inconsistent with charges that he is motivated by greed, an argument they expect the prosecution to make. Federal prosecutors say they are intending to make no such argument.

Gupta, a former CEO of McKinsey and Company, is charged with providing inside information to Galleon Group hedge-fund founder Raj Rajaratnam while Gupta sat on the boards of Goldman Sachs and Procter & Gamble Co. Rajaratnam, who in 2008 was listed by Forbes as number 262 on their list of the 400 richest Americans, was found guilty in U.S. District Court of 14 counts of conspiracy and securities fraud in May of 2011.

Gupta’s philanthropic activities are indeed extensive and very prestigious. He has been a trustee for the Rockefeller Foundation and has served on the boards of various business schools, including Harvard’s. He has also served on the board of the Global Fund to Fight AIDS, Tuberculosis and Malaria. He has also served as co-chairman of the India Aids Initiative at the Gates Foundation.

U.S. District Court Judge Jed S. Rakoff has said that if Gupta wants to present this charity defense he might have to take the stand—which would open him up to questioning on more than just his charity work. The New York Times reported that Rakoff commented, “If Mother Teresa were here and charged with bank robbery, the jury would still have to determine whether or not she committed bank robbery.” –Ruth McCambridge