A former Goldman Sachs director, Rajat K. Gupta, may remain free on bail while he challenges his insider-trading conviction, a federal appeals court ruled on Tuesday.
In a surprise decision, the United States Court of Appeals for the Second Circuit in Manhattan ruled that Mr. Gupta would not have to report to prison until his appeal is heard, which could take a year. He had been set to start serving his two-year sentence on Jan. 8.
Mr. Gupta, 64, was found guilty in June of leaking Goldman’s boardroom secrets to his friend, the former hedge fund managerRaj Rajaratnam.
Tuesday’s ruling suggested that Mr. Gupta had convinced the judges that he had legitimate issues to argue on appeal. The same federal appeals court had denied a request by Mr. Rajaratnam to remain free on bail pending his appeal. Mr. Rajaratnam is serving an 11-year prison term.
Mr. Gupta’s lawyers are expected to make several arguments. The most significant issue on appeal could be the government’s use of the wiretaps in the trial.
Judge Jed S. Rakoff, the trial court judge, allowed the jury to hear incriminating taped conversations involving Mr. Rajaratnam and his traders. Those conversations suggested Mr. Rajaratnam had a source at Goldman.
“I heard yesterday from somebody who’s on the board of Goldman Sachs that they are going to lose $ 2 per share,” Mr. Rajaratnam told a colleague on a wiretapped call in October 2008.
Multimedia: Insider Trading
Without the wiretaps, prosecutors would have had to rely on circumstantial evidence — telephone bills and trading records — to prove their case.
Mr. Gupta’s lawyers had argued that because the conversations were between Mr. Rajaratnam and his employees, Judge Rakoff should declare them inadmissible hearsay evidence, meaning that they were too unreliable to be used against Mr. Gupta.
Another issue that Mr. Gupta’s lawyers are expected to raise is that Judge Rakoff erred in limiting testimony by Mr. Gupta’s daughter about her father’s deteriorating relationship with Mr. Rajaratnam.
Mr. Gupta, who lives in Westport, Conn., has been free on $ 10 million bail since his arrest in October 2011. In addition to a team of lawyers from Kramer Levin Naftalis & Frankel that had represented him, Mr. Gupta hired Seth P. Waxman, an experienced appellate lawyer, to help with his appeal.
Mr. Waxman, a partner at WilmerHale, is a former United States solicitor general who has argued more than 50 cases before the United States Supreme Court.
The court is expected to hear Mr. Gupta’s appeal in the spring.