SEC Obtains $13.9 Million Penalty Against Former Goldman Sachs Board Member

Eliane Chavagnon Deputy Editor - Family Wealth Report 18 July 2013

SEC Obtains $13.9 Million Penalty Against Former Goldman Sachs Board Member

The Securities and Exchange Commission said yesterday it obtained a $13.9 million penalty against former Goldman Sachs board member Rajat Gupta for illegally tipping corporate secrets to former hedge fund manager Raj Rajaratnam. 

The order, issued by Jed Rakoff of the US District Court for the Southern District of New York, permanently bars Gupta from acting as an officer or director of a public company and from associating with any broker, dealer, or investment advisor. 

The SEC alleged, in its complaint filed in late 2011, that Gupta disclosed confidential information to Rajaratnam about Berkshire Hathaway’s $5 billion investment in Goldman Sachs, along with non-public details about Goldman Sachs’ financial results for the second and fourth quarters of 2008. The US authority said it previously acquired a “record $92.8 million penalty” against Rajaratnam for prior insider trading charges.

In a parallel case “arising out of the same facts,” the SEC said it provided significant assistance to the US Attorney’s Office for the Southern District of New York in its criminal prosecution of Gupta, who was found guilty on June 15, 2012, of one count of conspiracy to commit securities fraud and three counts of securities fraud. 

Gupta was sentenced on October 24, 2012, to two years in prision, followed by one year of supervised release, and ordered to pay a $5 million criminal fine.

The SEC added that it obtained – on December 26 last year - a final judgment ordering Rajaratnam to disgorge his share of the profits gained, and losses avoided, as a result of the insider trading based on Gupta’s tips, plus prejudgment interest.

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