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Gupta should pay $15m: SEC

16 November 2012

press trust of india
NEW YORK, 16 NOV: The US government has asked a court here to slap a maximum penalty of $15 million on India-born fallen Wall Street titan Rajat Gupta and permanently bar him from serving as director of any publicly-traded firm for his “terrible breach of trust” by indulging in insider trading.
Weeks after the former Goldman Sachs director was handed down a two-year jail term and fined $5 million by US District Judge Jed Rakoff, the US Securities and Exchange Commission (SEC) said he should be ordered to pay a maximum civil penalty of $15 million, which would be thrice the $5 million in gains and losses avoided as a result of his “illegal conduct.”
Mr Gupta, 63, who is set to begin his prison term in January, has filed an appeal against his conviction in the US Court of Appeals for the Second Circuit.
According to the Notice of Appeal filed by his lawyer Gary Naftalis in US District Court Southern District of New York, Gupta's “appeal concerns conviction only.”
Apart from the criminal case filed against him by Manhattan's India-born Federal prosecutor Preet Bharara, Gupta faces charges filed by the SEC of “abusing his position of trust” and passing confidential information about Goldman Sachs and Proctor and Gamble to now-jailed hedge fund founder Raj Rajaratnam.
“The court should impose the maximum three-time civil penalty of $15,096,585 to punish Gupta for his terrible breach of trust and his craven, criminal conduct and to deter others from engaging in such conduct in the future,” the SEC said in a motion filed in federal court here.
The Commission has also sought an order permanently enjoining Gupta from future violations of the Federal securities laws, barring him from serving as an officer or director of any publicly-traded company, barring him from associating with any broker, dealer or investment advisor and disgorgement of all ill-gotten gains received as a result of his illegal actions.
“Gupta's conduct was far more egregious than that of the vast majority of defendants convicted of insider trading and warrants maximum penalty under the law,” the Federal regulator said. “He betrayed the enormous trust and confidence bestowed upon him in the most egregious manner possible.”
The SEC argued that despite his conviction, Gupta would still have a “lifelong” network of friends and business associates in the USA and abroad and with their help, he would be able to create for himself or be offered business positions that “make him privy to corporate secrets.”
Gupta, who produced over 400 letters of support, including those by Microsoft founder Bill Gates and former UN chief Kofi Annan prior to his sentencing, would continue to have access to highly placed corporate insiders, the SEC said.
“The danger of his access to material, non-public information still exists. Nothing currently prevents Gupta from using his continuing access to corporate insiders to solicit inside information and trade on it on his own behalf,” the SEC argued.