Wednesday, 28 January 2015
Last updated 12 hours ago
Sep 21 2011 | 12:52pm ET
Alleged Raj Rajaratnam tipster Rajat Gupta has skirted a civil battle with the Securities and Exchange Commission for now, but the former McKinsey & Co. chief may have a bigger problem.
Federal prosecutors in Manhattan are proceeding towards filing criminal charges against Gupta, six weeks after the Securities and Exchange Commission dropped—the agency says temporarily—its own case against him, The Wall Street Journal reports. In that administrative proceeding, the SEC accused Gupta, who served on the board of directors at Goldman Sachs, of passing confidential information about the bank to Rajaratnam, the Galleon Group founder convicted of insider-trading earlier this year.
Gupta has denied any wrongdoing and did not take the stand during Rajaratnam's trial, but prosecutors did play taped phone calls between the two men, longtime friends and business partners, for the jury. Goldman CEO Lloyd Blankfein testified that some of the information passed by Gupta about Berkshire Hathaway's planned investment in the bank was non-public and that Gupta's actions violated Goldman's policies.
"Any allegation that Rajat Gupta engaged in any unlawful conduct is totally baseless," Gupta's lawyer, Gary Naftalis, said.
No final decision on whether to bring criminal charges against Gupta have been made. Either way, the SEC, which says it is "fully committed" to bringing civil charges against Gupta, plans to wait until after criminal charges are filed—or definitively not filed—and could wait until any criminal proceedings are at an end.
Relations between the two enforcement agencies have been anything but smooth in dealing with the Gupta case. The U.S. Attorney's Office vehemently opposed the SEC's decision to file its case against Gupta before it filed criminal charges. But the SEC moved forward because Gupta was still serving on the boards of three public companies.
The SEC did file its case as an administrative action rather than a lawsuit in federal court to avoid hampering a possible criminal prosecution; the regulator feared—probably correctly—that U.S. District Judge Jed Rakoff would not have allowed it to delay a trial in the case. Last month, the SEC and Gupta agreed to drop their cases against each other, with the proviso that, if the SEC refiled its case against Gupta, it would do so in federal court.
Jan 23 2015 | 1:00pm ET
In our new section, FINtech Focus, we will profile one of these firms each week. While fintech is a broad category, we will be focusing on firms that specifically cater to the alternative investment industry. Read more…