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In the Sanjay Gupta Insider Trading Case, the Feds Cannot Hide the Ball

Posted By Steven Brill || 17-Apr-2012

A decision last month by Judge Jed Rakoff of the Southern District of New York underscores the importance of the government’s Brady obligation and exposes their efforts to avoid it.

In the case of USA v. Rajat Gupta , a criminal insider trading allegation, the United States Attorney’s Office (USAO) and the Securities Exchange Commission (SEC) conducted investigations that consisted of interviewing 44 witnesses. The SEC, however, also conducted separate interviews of 2 witnesses outside the presence of the USAO. The attorney for Mr. Gupta moved the Court to order the USAO to turn over all of the notes taken at both interviews – arguing that the information was considered Brady material (i.e. favorable evidence to the defendant).

The government disagreed, countering that the USAO and the SEC did not work as part of the "same prosecutorial team," that the USAO and the SEC made "independent investigatory and charging decisions," and that neither the USAO nor the SEC had control over the other's actions in how to proceed. The Government contends that because the SEC was not an "arm of the prosecutor" or part of a "joint prosecution team: so the Brady obligation does not extend to documents in the SEC’s possession.

But, Judge Rakoff disagreed with the USAO argument and reasoned that for “ Brady purposes, it is enough that the agencies are engaged in joint fact-gathering, even if they are making separate investigatory or charging decisions.” In essence, the government cannot avoid its crucial Brady obligations by trying to draw artificial distinctions between them and another investigative body when in fact they both are engaged in the same fact-gathering conduct.

The USAO reluctance to turn over the notes taken by the SEC attorney was somewhat surprising given the recent decision in USA v. Ted Stevens. In that case, the government withheld key pieces of evidence that would have been favorable to Senator Stevens while at the same time provide relevant evidence negatively affecting the cooperating witness’s credibility. The Brady violation was so egregious that the Department of Justice conceded the violation and asked the trial judge to void the conviction. In fact, just today (April 16, 2012), the lead AUSA resigned his position from the DOJ.

Has the USAO learned their lesson? Are the Stevens and Gupta decisions enough to assure that the government will not play games with this extremely important obligation? Given the government’s unquenching hunger to win – especially high profile matters – we probably have not seen the last of this.