Indian-American corporate honcho Rajat Gupta, convicted last year of insider trading, has now been asked to pay a hefty fine of $13.9 million to settle related civil charges.
The former McKinsey & Co. chief and Goldman Sachs director has also been permanently barred from serving as an officer or director of any public company, and from associating with any broker, dealer or investment adviser. last October, US District Judge Jed S. Rakoff sentenced the 64-year-old Gupta to a two-year prison term and a fine of $5 million in the criminal case after a jury had in June 2012 found him guilty of insider trading by illegally tipping corporate secrets to former hedge fund manager Raj Rajaratnam, who ran the Galleon Group.
Gupta is appealing the conviction and remains free during the appeal.
The new order imposing an additional $13.9 million fine was issued by Judge Jed S Rakoff on Wednesday, acting on a civil complaint from the US Securities and Exchange Commission (SEC). “The sanctions imposed today send a clear message to board members who are entrusted with protecting the confidences of the companies they serve,” said George S. Canellos, Co-Director of the SEC’s Division of Enforcement, after obtaining the penalty order against Gupta.
“If you abuse your position by sharing confidential company information with friends and business associates in exchange for private gain, you will be prosecuted to the fullest extent by the SEC,” he said. In its complaint filed in late 2011, the SEC alleged that Gupta disclosed confidential information to Rajaratnam about Berkshire Hathaway Inc.’s $5 billion investment in Goldman Sachs as well as nonpublic details about Goldman Sachs’ financial results for the second and fourth quarters of 2008.
In addition to imposing the financial penalty, the judge’s order “enjoins Gupta from future violations of the securities laws” by barring him from any post of officer or director in a public limited company, and from any association with any broker, dealer, or investment adviser, the SEC said.The securities watchdog said it has already obtained a record $92.8 million civil penalty against Rajaratnam, the Sri lanka-born billionaire, for prior insider trading charges. last December, it obtained 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.
In what has been called the biggest insider trading prosecution in US history, Rajaratnam is currently serving an 11-year prison sentence. He was fined $10 million in the criminal case and ordered to forfeit $53.8 million, besides the record $92.8 million civil penalty. Prosecutors had held that Rajaratnam illegally reaped as much as $75 million through his trades, including about $11 million from the information provided by Gupta.