Rajaratnam v. United States

17-1405-pr (L)
Rajaratnam v. United States
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1. WHEN
CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
ASUMMARY ORDER@). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON
ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held
at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New
York, on the 1st day of June, two thousand eighteen.
PRESENT: ROBERT D. SACK,
REENA RAGGI,
Circuit Judges,
PAUL G. GARDEPHE,
District Judge.*
RAJ RAJARATNAM,
Plaintiff-Appellant,
v. No. 17-1405-pr (L)
No. 17-1411-pr (CON)
UNITED STATES OF AMERICA,
Defendant-Appellee.
APPEARING FOR APPELLANT: CHRISTINE H. CHUNG, Selendy & Gay
PLLC (Adam M. Abensohn, Quinn Emanuel
Urquhart & Sullivan, LLP; Samidh Guha,
Jones Day, on the brief), New York,
New York.
*
Judge Paul G. Gardephe, of the United States District Court for the Southern District of
New York, sitting by designation.
APPEARING FOR APPELLEE: MICHAEL FERRARA, Assistant United
States Attorney (Sarah K. Eddy, Assistant
United States Attorney, on the brief), for
Geoffrey S. Berman, United States Attorney
for the Southern District of New York,
New York, New York.
Appeal from a judgment of the United States District Court for the Southern District
of New York (Loretta A. Preska, Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the order entered on March 3, 2017, is AFFIRMED.
Appellant Raj Rajaratnam, whose 2011 convictions for conspiratorial and
substantive securities fraud, see 15 U.S.C. §§ 78j(b), 78ff; 18 U.S.C. § 371; 17 C.F.R.
§§ 240.10b-5, 240.10b5-2, were affirmed by this court, see United States v. Rajaratnam,
719 F.3d 139 (2d Cir. 2013), now appeals from the denials of his motions for collateral
relief from conviction under 28 U.S.C. § 2255 (habeas corpus) and 28 U.S.C.
§ 1651 (coram nobis). We assume the parties’ familiarity with the facts and record of prior
proceedings, which we reference only as necessary to explain our decision to affirm.
1. Motion for § 2255 Relief
In his § 2255 motion, Rajaratnam challenges his insider trading convictions on
Counts 2, 5, 8, 9, and 10, as well as his culpability for one trade underlying his conviction
on Count 1, in light of this court’s decision in United States v. Newman, 773 F.3d 438 (2d
Cir. 2014), abrogated on other grounds by Salman v. United States, 137 S. Ct. 420 (2016).
Newman holds that to prove insider trading by a remote tippee, the government must prove
that the tippee knew that an insider disclosed confidential information in exchange for a
2
personal benefit. See id. at 442. Arguing that the government failed to prove this element
for certain trades, Rajaratnam seeks vacatur of the challenged counts and resentencing on
the remainder.
Where, as here, a defendant did not raise an argument on direct appeal, he is
procedurally barred from doing so on a collateral challenge under § 2255. See Zhang v.
United States, 506 F.3d 162, 166 (2d Cir. 2007). This rule recognizes the “tension”
between collateral challenges and “society’s strong interest in the finality of criminal
convictions” and, thus, “make[s] it more difficult for a defendant to upset a conviction by
collateral, as opposed to direct, attack.” Yick Man Mui v. United States, 614 F.3d 50, 53–
54 (2d Cir. 2010); see Bousley v. United States, 523 U.S. 614, 621 (1998) (“Habeas review
is an extraordinary remedy and will not be allowed to do service for an appeal.” (internal
quotation marks omitted)). An exception applies, however, if the defendant demonstrates
either (1) cause for the procedural default and ensuing prejudice, or (2) actual innocence.
See Cox v. United States, 783 F.3d 145, 150 (2d Cir. 2015). We review de novo the
question of whether a defendant’s procedural default of an argument on direct appeal may
be excused on a § 2255 motion. See Harrington v. United States, 689 F.3d 124, 129 (2d
Cir. 2012).
Rajaratnam does not here argue cause to excuse his failure to raise a knowledge-of-
benefit challenge on direct appeal.1 Instead, he argues that he is actually innocent of the
1
Before the district court, Rajaratnam argued cause for his default based on ineffective
assistance of counsel, but he does not invoke that exception on appeal. We therefore deem
his cause-related argument to be abandoned. See LoSacco v. City of Middletown, 71 F.3d
88, 92–93 (2d Cir. 1995).
3
challenged counts and trades. Actual innocence, however, excuses procedural default only
when a petitioner comes forward with “new evidence” and shows that “it is more likely
than not that no reasonable juror [aware of that evidence] would have convicted him.”
Schlup v. Delo, 513 U.S. 298, 327 (1995); accord House v. Bell, 547 U.S. 518, 536–37
(2006); see also United States v. Thorn, 659 F.3d 227, 233–34 (2d Cir. 2011). The Supreme
Court has cautioned that “tenable actual-innocence gateway pleas are rare,” McQuiggin v.
Perkins, 569 U.S. 383, 386 (2013), and that to demonstrate actual innocence, a defendant
“must prove his ‘factual innocence, not mere legal insufficiency,’” United States v. Thorn,
659 F.3d at 233–34 (quoting Bousley v. United States, 523 U.S. at 623) (emphasis added).
Rajaratnam falls short of meeting this standard. As an initial matter, Rajaratnam
offers no new evidence to support his actual innocence claim. See Dunham v. Travis, 313
F.3d 724, 730 (2d Cir. 2002) (concluding actual innocence standard not met, in part,
because petitioner “presented no new evidence of his innocence”); see also Schlup v. Delo,
513 U.S. at 316 (“Without any new evidence of innocence, even the existence of a
concededly meritorious constitutional violation is not in itself sufficient to establish a
miscarriage of justice that would allow a habeas court to reach the merits of a barred
claim.”). Moreover, Rajaratnam’s claim—that the government “failed to adduce proof at
trial” satisfying the knowledge-of-benefit element for Counts 2, 5, 8, 9, and 10, and for one
trade underlying Count 1, Appellant Br. 20–21, 28—is one of legal insufficiency, not
factual innocence.
In urging otherwise, Rajaratnam argues that Newman announced a “new substantive
rule” not existing at the time of his trial that now renders him innocent on the conduct
4
underlying the challenged counts. Id. at 20. Newman’s rule, however, was not “new”
within the context of this case. At Rajaratnam’s request, the district court instructed the
jury on the knowledge-of-benefit element, and when this court, three years later in
Newman, explained that every district court in the circuit save one already required the
government to prove knowledge of benefit as an element of insider trading, we cited
Rajaratnam’s case as among those anticipating the Newman ruling. See United States v.
Newman, 773 F.3d at 449–50 (citing United States v. Rajaratnam, 802 F. Supp. 2d 491,
498–99 (S.D.N.Y. 2011)).2
Thus, in the absence of new evidence or an intervening change in the law,
Rajaratnam’s § 2255 motion presents only a challenge to the legal sufficiency of the
evidence to prove his knowledge of the benefits conferred on insiders, specifically, the
ability to draw inferences of such knowledge on the existing record and in light of
conflicting witness testimony. Such a claim of insufficiency does not assert factual
2
Rajaratnam argues that the district court improperly instructed the knowledge-of-benefit
element, noting a departure from the written charge earlier circulated to the parties. The
discrepancy was known to Rajaratnam at the time of his direct appeal, such that his failure
to raise it precludes collateral challenge. See Zhang v. United States, 506 F.3d at 166. In
any event, even if the district court misspoke while reading the charge, it nonetheless
instructed the jury in pertinent part that the government had to prove that Rajaratnam
“knew that the information had been disclosed by an insider or tipper in breach of a duty
to the owner of material information”; that an insider breaches that duty when he or she
“receiv[es] a personal benefit” for disclosing the information; and that the government had
to prove Rajaratnam “knew that the information was material, non-public information that
if disclosed by an insider would directly or indirectly obtain some personal benefit from
the disclosure.” Tr. 5619–20, 5623 (emphasis added). Rajaratnam cannot show that these
instructions failed to charge the knowledge-of-benefit element. See United States v.
Newman, 773 F.3d at 447–50.
5
innocence and, thus, cannot excuse Rajaratnam’s procedural default of his knowledge-of-
benefit challenge. See United States v. Thorn, 659 F.3d at 233–34.
Accordingly, we affirm the district court’s denial of Rajaratnam’s § 2255 motion.
See Bruh v. Bessemer Venture Partners III L.P., 464 F.3d 202, 205 (2d Cir. 2006)
(explaining appellate court may affirm district court on any basis for which there is
sufficient support in record).
2. Motion for Coram Nobis Relief
In his motion for a writ of error coram nobis, Rajaratnam challenges his
$53,816,434 forfeiture order, arguing that (1) because he is actually innocent as to certain
counts and trades in light of Newman, his forfeiture order should be reduced accordingly;
and (2) United States v. Contorinis, 692 F.3d 136 (2d Cir. 2012), precludes recovery from
Rajaratnam of insider trading gains realized by Galleon and its investors, rather than by
Rajaratnam personally.
Coram nobis is an “extraordinary remedy” that “issues only in extreme cases,”
United States v. Denedo, 556 U.S. 904, 916 (2009), and is “strictly limited to those cases
in which errors . . . of the most fundamental character have rendered the proceeding itself
irregular and invalid,” Foont v. United States, 93 F.3d 76, 78 (2d Cir. 1996) (internal
quotation marks omitted) (stating that coram nobis requires showing (1) “circumstances
compelling such action to achieve justice,” (2) “sound reasons . . . for fail[ing] to seek
appropriate earlier relief,” and (3) movant “continues to suffer legal consequences from his
conviction that may be remedied by granting of the writ” (internal quotation marks and
alterations omitted)). The burden of showing entitlement to coram nobis relief is a heavy
6
one because a reviewing court “must presume that the proceedings were correct, and the
burden of showing otherwise rests on the petitioner.” United States v. Mandanici, 205 F.3d
519, 524 (2d Cir. 2000). We review de novo whether the district court applied the proper
legal standard, but we review its ultimate decision to deny the writ for abuse of discretion.
See id.
Insofar as Rajaratnam seeks coram nobis relief on the ground that he is actually
innocent of certain trades, that argument fails because, as stated above, he has not
demonstrated actual innocence.
Rajaratnam is no more entitled to coram nobis relief on the basis of Contorinis.
There, a portfolio manager of an investment fund “made investment decisions” on behalf
of, and owned a “small equity” stake in, the investment fund, but he “did not control
disbursement of [its] profits.” United States v. Contorinis, 692 F.3d at 139, 145. In the
absence of disbursement control, this court concluded that the defendant never personally
received or possessed all $12.65 million realized by the fund from his insider trading and,
thus, vacated the forfeiture order in that amount. See id. at 145–47 (explaining that
defendant “acquire[s]” proceeds when property “at some point” comes “under the
defendant’s control”). By contrast, here, Rajaratnam was the founder and managing
general partner of Galleon and, as such, exercised “control” over both that firm and the
proceeds it acquired, including the proceeds acquired as a result of his insider trading. Even
if those proceeds subsequently were distributed to investors, with Rajaratnam personally
retaining only a percentage as management fees, he nonetheless had authority over
disbursements, and, thus, exercised “control” over the proceeds “at some point.” Id. at
7
147. In these circumstances, we identify no abuse of discretion in the district court’s
conclusion that coram nobis relief is not compelled to achieve justice, and, accordingly,
we affirm denial of the coram nobis motion.
We have considered Rajaratnam’s remaining arguments and conclude that they are
without merit. For the reasons stated, we AFFIRM the order of the district court.
FOR THE COURT:
CATHERINE O’HAGAN WOLFE, Clerk of Court
8