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United States Court of Appeals             NN Case 15-2707, Document 90, 05/05/2016, 1765892, Page1 of 51 15-2707(L) 15-2712(CON) United States Court of Appeals NN ! " # ! $ %%&& '()(*+,(-(./ (0 *.1(0 *.1%2234 56%67&%89:%22 Case 15-2707, Document 90, 05/05/2016, 1765892, Page2 of 51 TABLE OF CONTENTS Page TABLE OF AUTHORITIES ................................................................................... iii PRELIMINARY STATEMENT ............................................................................... 1 JURISDICTIONAL STATEMENT .......................................................................... 4 STATEMENT OF THE ISSUES............................................................................... 4 STATEMENT OF THE CASE .................................................................................. 5 A. Procedural History ................................................................................. 5 B. Factual Background ............................................................................... 6 SUMMARY OF ARGUMENT ................................................................................. 7 ARGUMENT ........................................................................................................... 10 I. THE DISTRICT COURT’S PERSONAL BENEFIT INSTRUCTION WAS ERRONEOUS AND RESULTED IN GUPTA’S CONVICTION FOR CONDUCT THAT IS NOT A CRIME ........................................................................................................... 10 A. Following Newman, the Personal Benefit Instruction Was Legally Invalid .................................................................................... 10 B. The Instructional Error Was Prejudicial ............................................. 11 C. The Instructional Error Was Not Made Harmless By Inclusion of an Alternative Theory of Benefit .................................... 16 II. GUPTA’S PROCEDURAL DEFAULT DOES NOT BAR RELIEF ON THE MERITS .......................................................................... 21 A. Montgomery v. Louisiana ................................................................... 21 B. Cause and Prejudice ............................................................................ 23 C. Actual Innocence................................................................................. 27 - i - Case 15-2707, Document 90, 05/05/2016, 1765892, Page3 of 51 Table of Contents (Cont’d) Page CONCLUSION ........................................................................................................ 27 - ii - Case 15-2707, Document 90, 05/05/2016, 1765892, Page4 of 51 TABLE OF AUTHORITIES Page Cases Davis v. United States, 417 U.S. 333 (1974) ............................................................................................ 23 Gupta v. United States, 135 S. Ct. 1841 (2015) .......................................................................................... 5 Gutierrez v. Smith, 702 F.3d 103 (2d Cir. 2012) ......................................................................... 23, 24 Harrington v. United States, 689 F.3d 124 (2d Cir. 2012) ............................................................................... 24 Hedgpeth v. Pulido, 555 U.S. 57 (2008) .............................................................................................. 11 Montgomery v. Louisiana, 136 S. Ct. 718 (2016) ............................................................................ 5, 9, 21, 22 O’Neal v. McAninch, 513 U.S. 432 (1995) ............................................................................................ 20 Peck v. United States, 106 F.3d 450 (2d Cir. 1997) ............................................................................... 26 Schlup v. Delo, 513 U.S. 298 (1995) ............................................................................................ 27 SEC v. Obus, 693 F.3d 276 (2d Cir. 2012) ............................................................................... 25 SEC v. Warde, 151 F.3d 42 (2d Cir. 1998) ........................................................................... 24, 25 United States v. Andrews, 681 F.3d 509 (3d Cir. 2012) ............................................................................... 12 United States v. Del Toro, 513 F.2d 656 (2d Cir. 1975) ............................................................................... 22 - iii - Case 15-2707, Document 90, 05/05/2016, 1765892, Page5 of 51 Table of Authorities (Cont’d) Page United States v. Desnoyers, 637 F.3d 105 (2d Cir. 2011) ............................................................................... 19 United States v. Garcia, 992 F.2d 409 (2d Cir. 1993) ............................................................................... 19 United States v. Gupta, 111 F. Supp. 3d 557 (S.D.N.Y. 2015) .................................................................. 6 United States v. Gupta, 747 F.3d 111 (2d Cir. 2014) ................................................................................. 5 United States v. Loschiavo, 531 F.2d 659 (2d Cir. 1976) ......................................................................... 22, 23 United States v. Mahaffy, 693 F.3d 113 (2d Cir. 2012) ............................................................................... 20 United States v. Newman, 773 F.3d 438 (2d Cir. 2014) ........................................................................passim Statutes 18 U.S.C. § 3231 ........................................................................................................ 4 28 U.S.C. § 1291 ........................................................................................................ 4 28 U.S.C. § 2253 ........................................................................................................ 4 28 U.S.C. § 2255 ...............................................................................................passim - iv - Case 15-2707, Document 90, 05/05/2016, 1765892, Page6 of 51 PRELIMINARY STATEMENT In United States v. Newman, 773 F.3d 438 (2d Cir. 2014), this Court invalidated the theory upon which Rajat Gupta was convicted. Newman held that in order to satisfy the personal benefit element of an insider trading charge, the government must prove a quid pro quo, i.e., that the alleged tipper obtained, in exchange for his tips, an “objective, consequential . pecuniary or similarly valuable” gain, or the opportunity for such gain. The instruction in Gupta’s case permitted the jury to convict based on a finding that he received just “some modest benefit” (rather than a consequential one), and – crucially – the benefit did “not need to be financial or to be tangible in nature.” By way of example, the district court charged that merely “maintaining a good relationship” with the alleged tippee, Raj Rajaratnam, would suffice, thereby placing the court’s imprimatur on the government’s theory, proof and arguments to the jury in this case. (A-389).1 The instruction thus permitted the jury to convict Gupta for conduct that is not criminal after Newman. Indeed, the government has conceded as much. At argument before this Court on a bail motion in United States v. Whitman, the government addressed a virtually identical benefit instruction given by the same district court judge. Responding to Judge Parker’s statement that “if [Whitman’s] 1 Citations to “A” are to the Appendix submitted by Appellant Rajat Gupta on this appeal. Case 15-2707, Document 90, 05/05/2016, 1765892, Page7 of 51 direct appeal had occurred after Newman, this court would have tossed your conviction,” the government stated: “Right. We are not arguing that the jury instructions would have survived Newman.” (A-534). Judge Parker made the point with even greater force: “[I]t is beyond dispute that . Judge Rakoff got it wrong in his jury charge.” (A-531). Gupta was severely prejudiced by the erroneous instruction. The government lacked evidence showing Gupta received even a penny from his alleged wrongdoing. There was no quid pro quo. Recognizing as much, and not required to prove one under pre-Newman law, the government tried the case on the theory that “the benefit was about maintaining a good relationship” with Rajaratnam. (A-380). The court’s instructions, which were substantially those requested by the government, invited the jury to convict on this now legally invalid basis. Moreover, this instructional error did not just inevitably lead the jury to find a personal benefit pursuant to a now invalid standard. It eviscerated Gupta’s principal defense, the core premise of which was that, at the end of an illustrious – and lucrative – career, he would not have put his reputation and integrity at risk to tip Rajaratnam in exchange for nothing. In response to defense counsel’s opening statement that “it defies common sense . that in the twilight of an illustrious life [Gupta] would decide . to suddenly one day become a criminal and do it for no - 2 - Case 15-2707, Document 90, 05/05/2016, 1765892, Page8 of 51 benefit and no gain” (A-52), the government answered that there was indeed a benefit – the “good relationship” with Rajaratnam – motivating him, and that this was enough to make him a criminal. As in Whitman’s case, had Gupta’s trial come after this Court’s decision in Newman, the government would have been required to prove a tangible and consequential benefit in exchange for tips, which it could not have done. On the merits, such substantial prejudice warrants a new trial. The district court,
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