Aug. 5 (Bloomberg) -- The U.S. Securities and Exchange Commission agreed to drop an administrative action against former Goldman Sachs Group Inc. director Rajat Gupta, and he pledged to dismiss a lawsuit claiming the regulatory proceeding violated his constitutional rights.
“Mr. Gupta is very pleased that as a result of his lawsuit the SEC has dismissed its administrative proceeding and he will no longer be singled out for disparate treatment,” Gary Naftalis, his lawyer, said in a statement. “Mr. Gupta’s lawsuit against the SEC has achieved all of the relief he sought.”
The SEC started an administrative proceeding in Washington March 1, claiming Gupta passed inside information to Galleon Group LLC co-founder Raj Rajaratnam about Goldman Sachs and Procter & Gamble Co., where Gupta was also on the board.
According to an agreement filed yesterday in federal court in Manhattan, the SEC will file any future complaint against Gupta in that court, where it would be heard by U.S. District Judge Jed Rakoff.
“The staff is fully committed to the case and will proceed as appropriate,” John Nester, an SEC spokesman, said in an e- mail.
In the administrative proceeding, the SEC claimed Gupta gave Rajaratnam information about Berkshire Hathaway Inc.’s $5 billion investment in Goldman Sachs. The agency also alleges Gupta told Rajaratnam about quarterly earnings of Goldman Sachs and Procter & Gamble.
Gupta sued in the Manhattan court March 18, claiming the agency violated his rights by pursuing an administrative action rather than a lawsuit in federal court, where Gupta would have more procedural protections, including the right to have the case considered by a jury and the use of federal rules of evidence.
Rakoff ruled last month that Gupta, who hasn’t been charged criminally, could argue that the agency intentionally singled him out for unfair treatment in retaliation for claiming his innocence. The judge said that all 28 of the SEC’s other lawsuits related to the Galleon insider-trading case are in federal court.
“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,” Rakoff wrote in a July 11 opinion.
Rajaratnam was found guilty of 14 criminal counts of conspiracy and securities fraud on May 11. He is awaiting sentencing.
The SEC administrative proceeding is In the Matter of Rajat K. Gupta, 3-14279, U.S. Securities and Exchange Commission (Washington). The court case is Gupta v. SEC, 11-cv-01900, U.S. District Court, Southern District of New York (Manhattan).
--With assistance from Patricia Hurtado in New York. Editors: Andrew Dunn, Glenn Holdcraft
To contact the reporters on this story: Bob Van Voris in New York at email@example.com; Joshua Gallu in Washington at firstname.lastname@example.org.
To contact the editors responsible for this story: Michael Hytha at email@example.com; Lawrence Roberts at firstname.lastname@example.org