Justin Maxon/The New York TimesJudge Jed S. Rakoff
“A funny thing happened on the way to this forum.”
So opened the latest ruling from the ever-lively Judge Jed. S. Rakoff, a federal judge in Manhattan.
Judge Rakoff said on Monday that Rajat K. Gupta, the former Goldman Sachs and Procter Gamble director, can proceed with a lawsuit that accuses the Securities and Exchange Commission of violating his constitutional rights.
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 head of the Galleon Group hedge fund, who was convicted of insider-trading crimes in May.
Mr. Gupta’s lawyers fired back at the S.E.C., filing a lawsuit asking to move the case to federal court. The complaint said that the S.E.C.’s administrative action denied Mr. Gupta the right to a jury trial and treated him differently than the more than two dozen other Galleon-related defendants who were all sued in federal court. (The administrative proceeding is being heard before an S.E.C. administrative law judge in Washington.)
Seokyong Lee/Bloomberg NewsRajat K. Gupta, the former Goldman Sachs and Procter Gamble director accused of leaking confidential information about those companies.
Judge Rakoff sympathized with the argument by Mr. Gupta that the S.E.C. potentially violated his constitutional rights under the Equal Protection Clause.
“We have the unusual case where there is already a well-developed public record of Gupta being treated substantially disparately from 28 essentially identical defendants, with not even a hint from the S.E.C., even in their instant papers, as to why this should be so,” Judge Rakoff said.
Judge Rakoff takes the S.E.C. to task throughout the opinion. He calls the agency’s decision to file the administrative proceeding against Mr. Gupta a “seeming exercise in forum-shopping.” He also says that the complaint suggests that the S.E.C. took a “cavalier approach” in approving the administrative proceeding.
“We are reviewing the decision and will proceed in a manner that maintains the commission’s authority to best serve the interests of investors and the integrity of the markets,” an S.E.C. spokesman said.
Judge Rakoff also noted that the S.E.C. had delayed Mr. Gupta’s hearing, which was originally scheduled for July 18, for six months. This will give him “ample opportunity” to decide whether the S.E.C. violated Mr. Gupta’s constitutional rights, the judge said.
The lengthy postponement in the proceeding raises questions about the fate of Mr. Gupta, the most prominent business executive ensnared by the government’s insider-trading crackdown. The United States attorney’s office in Manhattan, which has been investigating Mr. Gupta’s role in the case for at least three years, named Mr. Gupta a co-conspirator of Mr. Rajaratnam’s but has not charged him criminally.
Gary P. Naftalis, a lawyer for Mr. Gupta, has called the S.E.C.’s case “totally baseless.”
Monday’s decision is the latest in a series of rulings in which Judge Rakoff has criticized the S.E.C.’s actions. In March, Judge Rakoff chafed at the agency’s practice of allowing defendants to settle cases “without or admitting or denying wrongdoing,” describing the practice as treating the court as a “rubber stamp.” And last year, in approving a deal between the S.E.C. and Bank of America over its acquisition of Merrill Lynch, he called the settlement as “half-baked justice.”
Mr. Gupta’s case is the latest major proceeding that Judge Rakoff has welcomed into his courtroom in recent weeks. Earlier this month he agreed to hear the billion-dollar action brought against the owners of the New York Mets baseball team by the trustee seeking to recover money for victims of Bernard L. Madoff’s fraud. That lawsuit was originally brought in bankruptcy court, but Judge Rakoff took control of the case.
Rakoff’s Ruling in Favor of Gupta
Article source: http://feeds.nytimes.com/click.phdo?i=e94ad0b4ca8ec075630be20f38dd3cc1
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