DealBook: S.E.C. Drops Proceeding Against Rajat Gupta

Seokyong Lee/Bloomberg NewsRajat K. Gupta, a former director of Goldman Sachs.

8:26 p.m. | Updated

The Securities and Exchange Commission has dropped its administrative proceeding against Rajat K. Gupta, a former director of Goldman Sachs and Procter Gamble, handing him a victory in his legal battle with the agency.

“The commission has determined that it is in the public interest to dismiss these proceedings,” the S.E.C. said in a two-page order filed late Thursday.

In March, the S.E.C. filed an unusual civil administrative proceeding against Mr. Gupta that accused him of leaking secret board discussions to Raj Rajaratnam, the hedge fund billionaire, now convicted. The proceeding would have been heard by an S.E.C. administrative law judge in Washington.

In response to the administrative action, Mr. Gupta’s lawyers fired back with a lawsuit against the S.E.C. that accused it of denying Mr. Gupta his right to a jury trial and treating him differently than the other Mr. Rajaratnam-related defendants, all of whom the agency sued in federal court.

Last month, the presiding judge in the case, Jed S. Rakoff, issued a ruling that allowed Mr. Gupta’s lawsuit to proceed and criticized the S.E.C. for bringing the administrative proceeding instead of a federal lawsuit.

“Mr. Gupta is very pleased that as a result of his lawsuit, the S.E.C. has dismissed its administrative proceeding and he will no longer be singled out for disparate treatment,” Gary P. Naftalis, a lawyer for Mr. Gupta, said in a statement. “As we’ve said previously, the S.E.C.’s allegations are totally baseless and cannot withstand scrutiny.”

Mr. Gupta, who also served as the head of the consulting firm McKinsey Company, has agreed to drop his lawsuit against the S.E.C., according to court papers filed Thursday.

The S.E.C. can still sue Mr. Gupta in federal court before Judge Rakoff. Federal prosecutors, meanwhile, have not brought criminal charges against Mr. Gupta but called him an unindicted co-conspirator of Mr. Rajaratnam.

A spokeswoman for the United States attorney’s office in Manhattan declined to comment. An S.E.C. spokesman said that “the staff is fully committed to the case and will proceed as appropriate.”

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