The Galleon prosecution: hoist by its own petard?

Larry Ribstein —  4 May 2011

Dave Zaring asks whether the Rajaratnam trial, now doomed by a sick juror to start deliberations all over again, is headed for a hung jury. 

Dave suspects the jury is more likely hung 11-1 to convict than vice versa.  But there’s another possibility:  there are a lot of charges in this cases which occupy a wide space in terms of likelihood of illegality.  The jury may be divided every which way on these charges.

As I discussed last week, the case is complex because the government wanted it this way. But this leaves a lay jury with the huge task of sorting out legal theories, mountains of factual evidence, skilled expert testimony and a sophisticated defense by a top trial lawyer.  Now we see why the government prefers to frighten defendants into caving in.  This tactic didn’t succeed with a billionaire defendant who had little to lose from a trial. 

Before this is over, the government may come to regret its approach to insider trading prosecutions.

Larry Ribstein


Professor of Law, University of Illinois College of Law

3 responses to The Galleon prosecution: hoist by its own petard?


    The additional problem is that I am not even sure that Preet Bharara himself has a firm idea of whether or not the defendant is in fact guilty of the various counts, since the concepts of materiality, duty and fiduciary duty in the context of insider trading seem to be quite malleable concepts in the SDNY these days.

    Preet Bharara seems to be acting on the “equal access” theory of insider trading that has been rejected by the Supreme Court precisely because “of course the defendant had an edge; that’s why he gets paid to manage other peoples’ money; that’s his job; we don’t want to discourage vigorous research.”

    So is Preet Bharara arguing that having good connections and an edge is illegal? Or is he arguing that the defendant had too much of an edge? Or is it the type of edge that was illegal?

    When Bharara is forced to address the element of each count, he will often lose on materiality and he will just as often fail on breach of fiduciary duty. The only clearly illegal tips were the alleged ones from Gupta, but there they mysteriously don’t have any recordings.

    Indeed, Gupta’s alleged conduct was by far the most egregious of any of the 26 defendants’. He blatantly violated his fiduciary duties and provided extremely valuable, material and confidential information. Yet Gupta is the only one Bharara has not charged.

    At the end of the day, it’s difficult not to conclude that all of this has more to do with politics surrounding Bharara, Holder and Obama (e.g., distracting the public from their deliberate decision to go after no one on Wall Street for the 2008 fraud and wanting, in line with that, to in a sense give Rajat Gupta a pass in this matter, given his membership in the elite and the immunity that that provides during this administration).

    Julius Loeser 4 May 2011 at 11:50 am

    Larry, your point about the Raj trial and the inability of US Attorneys to persuade juries of complex theories is supported by the result of the first Blagojevich trial in Chicago which ended in a hung jury on 23 of 24 counts, a result that most attribute to the jury’s inability to follow all of the complexities of 24 different counts.

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