Rajat Gupta, SEC Agree to Drop Galleon-Related Suit, Administrative Action
Rajat Gupta
Seokyong Lee/Bloomberg
The U.S. Securities and Exchange Commission agreed to drop an administrative action against former Goldman Sachs Group Inc. director Rajat Gupta , and he pledged to dismiss a lawsuit claiming the regulatory proceeding violated his constitutional rights.
The U.S. Securities and Exchange Commission agreed to drop an administrative action against former Goldman Sachs Group Inc. director Rajat Gupta , and he pledged to dismiss a lawsuit claiming the regulatory proceeding violated his constitutional rights. Photographer: Seokyong Lee/Bloomberg
The U.S. Securities and Exchange Commission agreed to drop an administrative action against former Goldman Sachs Group Inc. (GS) director Rajat Gupta, and he pledged to withdraw a lawsuit claiming the regulatory proceeding violated his constitutional rights.
The SEC started the proceeding in Washington on March 1, contending Gupta passed inside information to Galleon Group LLC co-founder Raj Rajaratnam about Goldman Sachs and Procter & Gamble Co. (PG), where Gupta was also on the board.
Gupta sued in U.S. District Court in Manhattan on March 18, claiming the agency violated his rights by pursuing an administrative action rather than a lawsuit. Gupta would have more procedural protections in court, including the right to a jury trial and the use of federal rules of evidence.
In an agreement with Gupta filed in court yesterday, the SEC pledged to file any lawsuit over the same matter in federal court in Manhattan, where it would be heard by U.S. District Judge Jed Rakoff, who was assigned Gupta’s lawsuit.
“The staff is fully committed to the case and will proceed as appropriate,” John Nester, an SEC spokesman, said in an e- mail. The SEC didn’t say it would file a new lawsuit.
Gary Naftalis, Gupta’s lawyer, said in a statement that Gupta’s lawsuit against the SEC “has achieved all of the relief he sought.”
Naftalis and Nester both declined to say whether they expect the SEC to file a new suit against Gupta.
Administrative Suit
In the administrative proceeding, the SEC claimed Gupta gave Rajaratnam information about Berkshire Hathaway Inc.’s $5 billion investment in Goldman Sachs. The agency also alleges Gupta told Rajaratnam about quarterly earnings of Goldman Sachs and Procter & Gamble.
Rakoff ruled last month that Gupta, who hasn’t been charged criminally, could argue that the agency intentionally singled him out for unfair treatment in retaliation for claiming his innocence. The judge said that all 28 of the SEC’s other lawsuits related to the Galleon insider-trading case are in federal court.
“We have the unusual case where there is already a well- developed public record of Gupta being treated substantially disparately from 28 essentially identical defendants, with not even a hint from the SEC, even in their instant papers, as to why this should be so,” Rakoff wrote in a July 11 opinion.
Rajaratnam was found guilty of 14 criminal counts of conspiracy and securities fraud on May 11. He is awaiting sentencing.
The SEC administrative proceeding is In the Matter of Rajat K. Gupta, 3-14279, U.S. Securities and Exchange Commission (Washington). The court case is Gupta v. SEC, 11-cv-01900, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporters on this story: Bob Van Voris in New York at rvanvoris@bloomberg.net; Joshua Gallu in Washington at jgallu@bloomberg.net.
To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net; Lawrence Roberts at lroberts13@bloomberg.net.
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