Bloomberg News

Rajat Gupta Should Pay Maximum Civil Penalty, SEC Says

December 11, 2012

Rajat Gupta, the former Goldman Sachs Group Inc. (GS:US) director found guilty at an insider-trading trial, should be required to pay the maximum civil penalty, the U.S. Securities and Exchange Commission said in a court filing.

Gupta was motivated by personal gain and can afford the $15 million fine the SEC is seeking because he still has tens of millions of dollars for an “enviable retirement,” Kevin McGrath, an SEC attorney, said in today’s filing in federal court in Manhattan. The former Goldman executive is worth about $85 million, evidence at his trial showed, McGrath said.

Imposing the maximum penalty is needed to send a deterrent message, McGrath said.

“Given the enormous profits to be reaped by hedge fund traders and other industry and corporate professionals, incentives to violate the law are greater than ever,” he said in the filing.

Gupta, who is appealing his conviction, should also be barred from being an officer or director of a company because he has yet to acknowledge he did anything wrong and there’s a risk that he could violate securities laws again “given the network of well-placed corporate insiders who remain loyal to him,” the SEC said in the filing.

The SEC also seeks a court order barring Gupta from violating securities laws. Gupta objected, saying the commission hasn’t shown that there’s a likelihood of that happening.

Gupta’s Incentives

“Gupta’s continuing network of friends and associates at the highest levels of the corporate community give Gupta potential access to inside information in the future,” McGrath said. “Gupta’s incentives for financial gain will only increase in the future, as his earning potential and business status undoubtedly has been diminished.”

Gupta was convicted by a jury in June of one count of conspiracy and three counts of securities fraud. He was accused of passing illegal information about New York-based Goldman Sachs to Galleon Group LLC co-founder Raj Rajaratnam, his friend and business partner. The jury convicted Gupta of twice passing information about Goldman Sachs to Rajaratnam, once on Sept. 23, 2008, and again on Oct. 23, 2008.

The case is U.S. Securities and Exchange Commission v. Gupta, 11-07566, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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