By Nate Raymond
NEW YORK (Reuters) - Lawyers for former Goldman Sachs Group Inc board member Rajat Gupta are urging a federal appeals court to reverse his insider trading conviction, arguing that a judge shouldn't have allowed wiretaps to be heard at trial.
In a brief filed Friday at the 2nd U.S. Circuit Court of Appeals in New York, Gupta's lawyers argued wiretaps of now-imprisoned hedge fund manager Raj Rajaratnam amounted to "hearsay statements" and should not have been presented to the jury.
"Without a proper basis for admission, these untestable, unreliable hearsay statements had no place in a criminal trial, and their admission alone compels reversal," Gupta's lawyers wrote.
A federal jury convicted Gupta, 64, in June of leaking Goldman boardroom secrets to Rajaratnam, the Galleon Group hedge fund manager at the center of a wide-ranging U.S. probe into insider trading.
Gupta, who was at one time head of management consultancy McKinsey & Co, was sentenced by U.S. District Judge Jed Rakoff to two years in prison. The 2nd Circuit in December said Gupta could remain free on bail while he appeals his conviction.
A trial is scheduled to begin February 11 in a separate civil lawsuit by the U.S. Securities and Exchange Commission.
Of the four counts Gupta was charged with in the criminal case, his lawyers said Friday that the jury only convicted him on the two backed by wiretaps of Rajaratnam, who is serving an 11-year sentence following his own conviction in May 2011.
Gupta's lawyers say the wiretaps amounted to hearsay evidence, since they were of conversations between Rajaratnam and other Galleon Group employees, rather than with Gupta.
Gupta's lawyers said he was also prevented from presenting evidence of an alternative perpetrator and of Gupta's integrity.
The defense lawyers say they weren't allowed to present testimony by Gupta's daughter about a conversation where her father said he was angry at Rajaratnam for allegedly cheating him out of millions of dollars through a joint investment fund known as Voyager Capital Partners.
The conversation took place three days before one of the alleged tips Gupta was convicted on and a month before a second, the brief said. Gupta contends that if the testimony had been presented, the jury would have been led to question Gupta's motives to tip Rajaratnam.
Terence Lynam, a lawyer for Raj Rajaratnam, in a statement denied that his client "swindled" Gupta, as the appellate brief claimed.
"No funds of Mr. Gupta were ever misappropriated and Mr. Gupta was not 'swindled' in any way," Lynam said.
A spokeswoman for Manhattan U.S. Attorney Preet Bharara declined comment. The government is scheduled to respond with its own appellate brief March 15.
The case is USA v. Rajat Gupta, 2nd U.S. Circuit Court of Appeals, No 12-4448.
(Reporting by Nate Raymond in New York; Editing by Phil Berlowitz, Bernard Orr)