Lawyers: Gupta Tape Not Enough For Criminal Charges

Mar 18 2011 | 12:56pm ET

Why wasn't former McKinsey & Co. chief Rajat Gupta charged with a crime for allegedly passing confidential information on to Galleon Group founder Raj Rajaratnam? Indeed, why is he the subject only of a Securities and Exchange Commission administrative action, rather than a lawsuit, a move a federal judge this week called "bizarre"?

The answer, it seems, may lie in the 18-minute long telephone conversation prosecutors played for jurors in Rajaratnam's insider-trading case this week. While the tape appears to show Gupta at the very least failing in his fiduciary duties as a Goldman Sachs board member by sharing confidential matters discussed by that body with Rajaratnam, it also appears to show that he wasn't engaging in insider trading under the letter of the law.

On the call, from July 2008, Rajaratnam is heard telling Gupta, "I called you because I am meeting with Gary Cohn on Thursday." Cohn is Goldman's president. That comment could be used by Gupta to show that he didn't know Rajaratnam planned to trade on the information he was providing.

Indeed, the opinion of the legal community is that Gupta is likely in the clear when it comes to criminal charges.

"If they were interested in criminally charging him, they would have done it by now," Richard Scheff of Montgomery McCracken Walker & Rhoads told Bloomberg News. "Usually, the fact that the SEC was allowed to proceed with its case means there won't be criminal charges," Dewey Pegno & Kramarsky's Tom Dewey added.

Dewey said he believes the call played this week—the only one that prosecutors will use that includes Gupta, Bloomberg reports—is not enough to support criminal charges. On the tape, Gupta is heard telling Rajaratnam that the Goldman board had discussed acquiring Wachovia Corp. and insurance giant American International Group.

Gupta's lawyer has repeatedly denied that his client did anything wrong.


In Depth

Change In 'Accredited Investor' Definition Could Hurt Crowdfunding Space

Jul 25 2014 | 8:14am ET

The Securities and Exchange Commission is considering changes to its 30-year-old...

Lifestyle

David Yarrow On Growing His Hedge Fund And Shooting The Animals And People Of Africa - As A Photographer

Jul 23 2014 | 6:44am ET

While he’s always been a photographer, recent expeditions to Iceland, Ethiopia...

Guest Contributor

The Truth About Track Record Portability

Jul 24 2014 | 5:55am ET

The number of private funds converting to mutual funds has increased significantly...

 

Sponsored Content

    Northern Trust Helps Hedge Funds Navigate Derivatives Regulations

    Jul 8 2014 | 10:48am ET

    The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…

Publisher's Note