Weighing the Factors in the Gupta Sentencing The memos submitted by the government and defense lawyers for the former Goldman Sachs director Rajat K. Gupta present sharply contrasting positions regarding how the court should punish the highest corporate executive caught in the crackdown on insider trading. In its filing to the United States District Court judge Jed S. Rakoff, the government says Mr. Gupta's insider trading and conspiracy were "shocking" and his "crimes are extraordinarily serious and damaging to the capital markets." On the flip side, the defense draws on more than 400 letters submitted to the court in support of Mr. Gupta, the former head of McKinsey & Company, to offer a picture of a generous humanitarian and family man in support the argument that the "convictions in this case represent an utter aberration." The contrast becomes clearer when each side presents its view on the appropriate sentence. The government backs the recommendation of the federal sentencing guidelines for a prison term of 97 to 121 months, which would be among the longest sentences given for insider trading. Mr. Gupta asks for probation and a "rigorous and lengthy program of community service" that would include "a less orthodox but innovative proposal" to work in Rwanda on a health program to combat H.I.V. In other words, prosecutors want him to wear the drab khaki clothing issued by the federal Bureau of Prisons for the next few years, while Mr. Gupta would like to become the equivalent of a Peace Corps volunteer. The starting point in a federal prosecution is the calculation required by the sentencing guidelines. The main component is the amount of the gain from insider trading. The presentence investigation report prepared by the United States Probation Office calculated that amount at approximately $11.5 million, which has the effect of adding eight to 10 years to the recommended sentence. Mr. Gupta disputes that amount, arguing that the court should use only a small portion of the gains attributable to what Raj Rajaratnam -- the former head of the Galleon Group hedge fund who received tips from Mr. Gupta -- directly realized from the trading. Under this analysis, the tipping resulted in a profit of only about $350,000 for Mr. Rajaratnam, producing a recommended sentence of 41 to 51 months. Judge Rakoff's first task will be to determine the amount of the gain that will be used to calculate the recommended sentence under the guidelines. And the defense memorandum is quick to quote the judge's words in another case when he criticized the gain analysis for playing such a significant role that appears contrary to "elementary notions of justice or even common sense." So don't be surprised if Judge Rakoff, who is scheduled to sentence Mr. Gupta on Wednesday, starts out at a much lower recommended sentence than what the government wants. That means we are unlikely to see a prison term close to the 11 years that Mr. Rajaratnam received from a different judge for his more extensive insider trading that resulted in an estimated gain of $63 million. Judge Rakoff has also shown a tendency in recent insider trading cases to give a prison term below the sentencing guidelines recommendation. For example, he gave Winifred Jiau, a consultant for expert network firm Primary Global, a sentence of four years for tipping despite the recommendation of prosecutors of a 10-year prison term. James Fleishman, who worked for Primary Global, received 30 months even though the government recommended the guidelines maximum of nine years in prison. While that is certainly heartening for Mr. Gupta, it should not be read as meaning Judge Rakoff will shy away from meting out a prison term. Despite the fact that Mr. Gupta did not benefit personally from the tipping, his position as a director is one of the most important in corporate America. Moreover, the evidence at trial showed that he was hardly reluctant about revealing confidential information learned from Goldman, including calling Mr. Rajaratnam within minutes of a board meeting. Mr. Gupta's sentencing memorandum by his defense team walks a fine line by offering up his extensive charitable work as a basis for a lighter punishment while avoiding something judges always like to see: a measure of contrition for the misconduct. The defense at trial disputed whether Mr. Gupta actually tipped Mr. Rajaratnam, and avoids acknowledging that he violated the insider trading laws. That posture protects Mr. Gupta's position in case the convictions were reversed and a retrial ordered. It also means he is unlikely to tell the court that he accepts responsibility for what he was convicted of doing. Despite his criticism of the sentencing guidelines, Judge Rakoff has also acknowledged that deterrence plays a significant role in sentencing for insider trading. As a former prosecutor and defense lawyer, he is keenly aware of how difficult it is to ferret out such conduct, and that his sentence will be closely watched by Wall Street traders. So where will Judge Rakoff come out? I doubt he will accept the defense proposal to give probation and send Mr. Gupta to Rwanda because of the message it would send about misconduct by a corporate executive. But he is equally unlikely to impose a sentence that is anywhere close to the eight to 10 years prosecutors are seeking. Another intriguing issue the judge will have to deal with is whether to order Mr. Gupta to pay restitution to Goldman. The firm has asked that it be reimbursed nearly $6.8 million because it was a victim of Mr. Gupta's violations. That amount includes 25 percent of the director fees paid to Mr. Gupta and Goldman's legal costs related to the case, like its internal investigation, responding to subpoenas and perhaps even preparing its chief executive, Lloyd C. Blankfein, to testify at trial. One element of an insider trading violation is a breach of fiduciary duty, which Mr. Gupta owed to the firm in his role as a director. But whether that makes Goldman a "victim" eligible to receive compensation is not clear because the firm did not lose anything directly from the tipping. If Goldman is successful in obtaining restitution, that is only a small part of its costs from the case. As Peter Lattman wrote in The New York Times, the firm has also paid a large portion of Mr. Gupta's legal fees of more than $30 million, and that bill will only increase once he appeals his conviction.