Tuesday, 23 August 2016
Last updated 52 min ago
Jul 12 2011 | 12:32pm ET
A federal judge has ruled that a former McKinsey & Co. director can sue the Securities and Exchange Commission for initiating an administrative proceeding against him rather than a civil lawsuit.
Rajat Gupta, who the SEC says passed confidential information about Goldman Sachs to Galleon Group founder and convicted insider-trader Raj Rajaratnam, did see his claim narrowed to his allegation that the regulator is seeking to deny him equal protection of the law. Gupta is the only defendant among the 29 people and companies charged by the SEC to be subject to an administrative proceeding rather than a lawsuit.
"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," U.S. District Judge Jed Rakoff ruled yesterday.
Gupta has asked Rakoff to order the SEC to bring its case against him in federal court, rather than before an administrative law judge, where evidentiary rules are much less favorable to defendants. The SEC, which said it may appeal Rakoff's ruling, argued that the judge did not have the jurisdiction to stop the administrative action, and that Gupta would be able to appeal the result of the action in federal appeals court after its conclusion.
The SEC's case against Gupta has been postponed indefinitely as prosecutors continue to look into the former Goldman director.
An evidentiary hearing in Gupta's case against the SEC will be held within four months, Rakoff said.