U.S. prosecutors asked a judge to delay the civil insider-trading case against Rajat Gupta brought by the Securities and Exchange Commission so that Gupta’s criminal trial can proceed first.
U.S. District Judge Jed Rakoff in New York scheduled a hearing tomorrow to decide whether to postpone the civil case against the former Goldman Sachs Group Inc. director until the criminal trial is completed, according to Stephanie Cirkovich, a spokeswoman for the Manhattan federal courts.
Gupta, who also sat on the board of Procter & Gamble Co. and led McKinsey & Co., was charged with five counts of securities fraud and one count of conspiracy to commit securities fraud in an indictment unsealed Oct. 26.
The SEC filed a related civil suit the same day against Gupta and his business associate Raj Rajaratnam, the Galleon Group LLC co-founder convicted in May of being at the center of the biggest insider-trading scheme in U.S. history.
Lawyers for Gupta and Rajaratnam oppose the civil case postponement sought by prosecutors in the office of Manhattan U.S. Attorney Preet Bharara, Cirkovich said.
Rakoff, who is presiding over both cases, has scheduled an April 9 trial date for Gupta’s criminal case and an Oct. 1 trial date for the SEC lawsuit.
The indictment of Gupta, 62, alleges that the resident of Westport, Connecticut, was a close friend of Rajaratnam who made multimillion-dollar investments with him and also passed him inside information after attending board meetings from 2008 through January 2009.
The tips generated “illicit profits and loss avoidance” of more than $23 million, the SEC alleged in its complaint.
Gary Naftalis, a lawyer for Gupta, didn’t immediately return a voice-mail message left at his office seeking comment about tomorrow’s hearing.
Rajaratnam, in addition to being a co-defendant in the SEC’s case against Gupta, was sued by the agency in 2009, when he was first charged criminally. Rajaratnam was ordered Nov. 8 to pay a $92.8 million penalty in the earlier SEC case, the largest fine ever imposed by the agency on an individual in an insider-trading case.
Rajaratnam was sentenced to 11 years in prison after he was convicted in May on all 14 counts of securities fraud and conspiracy against him.
The SEC says Gupta engaged in an “extensive insider-trading scheme” with Rajaratnam, allegedly passing tips about Berkshire Hathaway Inc.’s $5 billion investment in Goldman Sachs before it was publicly announced on Sept. 23, 2008, and about Procter & Gamble Co.’s earnings while he was a board member.
Kevin McGrath, a lawyer for the SEC, told Rakoff at a Nov. 8 hearing that the agency wanted to question under oath a “long list of witnesses,” including Gupta, Rajaratnam’s two brothers as well as Goldman Sachs and Procter & Gamble board members and current and former employees of both companies.
The cases are U.S. v. Gupta, 11-cr-00907, and SEC v. Gupta, 11-cv-07566, U.S. District Court, Southern District of New York (Manhattan).