Criminal Charges Likely For Ex-McKinsey Chief In Galleon Case

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.


In Depth

Q&A: Open Season For Closed-End Funds

Aug 29 2014 | 10:00am ET

When Maury Fertig and Bob Huffman, former Salomon Brothers coworkers, launched...

Lifestyle

Och Funds Women In Finance Initiative At U-M

Aug 28 2014 | 3:01pm ET

Och-Ziff Capital founder Daniel Och and his wife have made a "generous donation"...

Guest Contributor

Looking Ahead: What’s In Store For Managed Futures?

Aug 22 2014 | 12:52pm ET

The last five years were phenomenal for investors in equity indices. Will the next...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

July/August 2014 Cover

The time was right

Commodities/Futures magazine launched at the precipice of a revolution in the futures industry—really a revolution in the idea of risk management—that would move it from a small niche industry to ...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.