k gupta

DealBook: Former Goldman Director Gupta to Stay Free Pending His Appeal

December 4, 2012 by NewsMaker Leave a Comment

Spencer Platt/Getty ImagesRajat K. Gupta was sentenced to two years in prison for leaking boardroom secrets to a former hedge fund manager.

A former Goldman Sachs director Rajat K. Gupta can remain free on bail while he challenges his insider-trading conviction, a federal appeals court ruled on Tuesday.

In a surprise decision, the United States Court of Appeals for the Second Circuit in Manhattan ruled that Mr. Gupta will not have to report to prison until his appeal his heard, a process that can take as long as a year. He was set to start serving his two-year sentence on Jan. 8.

Mr. Gupta, 64, was found guilty in June of leaking Goldman’s boardroom secrets to his friend, the hedge fund manager Raj Rajaratnam.

Tuesday’s ruling suggests that Mr. Gupta persuaded the judges that he has legitimate issues to argue on appeal. The same federal appeals court had denied a request by Mr. Rajaratnam to remain free on bail pending his appeal. Mr. Rajaratnam is serving an 11-year prison term.

Mr. Gupta’s lawyers are expected to make several arguments in pushing for his conviction to be overturned. The most significant issue on appeal is expected to be the government’s use of the wiretaps during the trial. Judge Jed S. Rakoff, the trial-court judge, allowed the jury to hear incriminating wiretapped conversations involving Mr. Rajaratnam and his traders that suggested he had a source inside of Goldman.

”I heard yesterday from somebody who’s on the board of Goldman Sachs that they are going to lose $2 per share,” said Mr. Rajaratnam to one of his colleagues, on a wiretapped call, in October 2008.

Multimedia: Insider Trading

Without the wiretaps, prosecutors would have had to rely on circumstantial evidence — telephone bills and trading records — to prove their case.

Mr. Gupta’s lawyers had argued that because the conversations were between Mr. Rajaratnam and his employees, the judge should declare them inadmissible hearsay evidence, meaning that they were too unreliable to be used against Mr. Gupta.

Another issue that Mr. Gupta’s lawyers are expected to raise is that Judge Rakoff erred in curbing testimony by Mr. Gupta’s daughter about her father’s deteriorating relationship with Mr. Rajaratnam.

Mr. Gupta, who lives in Westport, Conn., has been free on $10 million bail since his arrest in October 2011. In addition to a team of lawyers from Kramer Levin Naftalis Frankel that have been representing him, Mr. Gupta hired Seth P. Waxman, a noted appellate lawyer, to help handle his appeal. Mr. Waxman, a partner at WilmerHale, is a former United States solicitor general who has argued more than 50 cases before the United States Supreme Court.

The court is expected to hear Mr. Gupta’s appeal this spring.

Article source: http://dealbook.nytimes.com/2012/12/04/former-goldman-director-gupta-to-stay-free-pending-his-appeal/?partner=rss&emc=rss

Filed Under: Business News Tagged With: k gupta, mr rajaratnam, rajat

DealBook: Gupta Won’t Testify at His Insider Trading Trial

June 11, 2012 by NewsMaker Leave a Comment

Peter Foley/Bloomberg NewsRajat Gupta, a former Goldman Sachs director, arriving at court last week.

Rajat K. Gupta, a former director of Goldman Sachs accused of leaking secrets about the bank, will not testify at his insider trading trial, according to a letter from his lawyers that was filed with the court on Sunday.

His lawyers’ decision is something of an about-face. Late Friday, after the jury had gone home for the weekend, Gary P. Naftalis, a lawyer for Mr. Gupta, said it was said that it was “highly likely” that his client would testify in his own defense next week.

On Sunday, Mr. Naftalis said he had reversed course.

“We have the spent the last day reviewing what we believe we need to present in the defense case,” Mr. Naftalis wrote in his letter. “After substantial reflection and consideration, we have determined that Mr. Gupta will not be a witness on his own behalf in the defense case.”

A spokesman for the United States attorney’s office in Manhattan declined to comment. Mr. Naftalis declined to comment beyond what was written in the letter.

The government has accused Mr. Gupta, who was also a former head of the consulting firm McKinsey Company, with leaking boardroom secrets about Goldman Sachs and Procter Gamble to his friend and business associate Raj Rajaratnam. Last year, a jury convicted Mr. Rajaratnam, the former head of the Galleon Group hedge fund, with insider trading.

The trial, in Federal District Court in Manhattan before Judge Jed S. Rakoff, will begin on Monday its fourth and final week.

On Friday, Mr. Naftalis had promised Judge Rakoff that if the defense decided that Mr. Gupta was not going take the stand, he would immediately inform the prosecutors so “they could put down their pencils” in preparing to cross examine him.

There were signficant risks — but also potential rewards — in having Mr. Gupta testify.

Once a defendant testifies in his own case, the jury’s focus often shifts from the government evidence to the credibility of Mr. Gupta, who, until recently, had a sterling reputation and a stellar business career. That could have worked in his favor if he would have been able to explain away the substantial circumstantial evidence against him.

But it could have also backfired if something went wrong on the witness stand and Mr. Gupta said something incriminating.

On Friday, the government rested its case after 12 days of testimony from 20 witnesses. The defense began putting on its own witnesses and will continue its case on Monday. Without Mr. Gupta’s testimony, closing statements could begin as soon as Tuesday, with the jury getting the case by mid-week.

Letter From Rajat Gupta’s Lawyer

Article source: http://dealbook.nytimes.com/2012/06/10/gupta-wont-testify-at-his-insider-trading-trial/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: k gupta, procter gamble, united states attorney

DealBook: Executive Surrenders to Face Charges in Trading Case

October 26, 2011 by NewsMaker Leave a Comment

Douglas Healey for The New York TimesRajat Gupta at his home in Westport, Conn., on Wednesday morning.

Rajat K. Gupta, a former Goldman Sachs director and McKinsey Company managing director, surrendered to the Federal Bureau of Investigation on Wednesday morning to face charges of insider trading, the latest development in the government’s multiyear crackdown on illegal activity on Wall Street.

In charging Mr. Gupta, the government will attempt to tie up one of the biggest loose ends resulting from the investigation into the Galleon Group, which began nearly five years ago at the Securities and Exchange Commission. Raj Rajaratnam, the Galleon co-founder, was sentenced to 11 years in prison this month for making tens of millions of dollars by trading on confidential tips.

Authorities have broadly pursued insider trading on Wall Street, exacting guilty pleas from a chemist at the Federal Drug Administration, among others, as recently as this month. In the past two years, authorities have charged 55 people with insider trading; of those, 51 have pleaded guilty or have been convicted of swapping illegal tips about company earnings and other major corporate events. While the majority of those charged have been traders and analysts on Wall Street, Mr. Gupta, 62, is the first executive to be implicated from the upper echelons of corporate America.

The charges are a stunning reversal of fortunes for Mr. Gupta. A native of India, he graduated from Harvard Business School and had a global profile as an adviser to some of the nation’s most iconic companies. He served as a director at Goldman, Procter Gamble and the parent company of American Airlines. In addition to his professional pedigree, Mr. Gupta was a noted philanthropist, serving in coveted posts with the Bill and Melinda Gates Foundation.

Mr. Gupta’s case has been a tricky one for the government. Though his name came up repeatedly at Mr. Rajaratnam’s trial, both in testimony and in secretly recorded phone conversations, the Justice Department never filed charges against him. The S.E.C. filed an administrative action against Mr. Gupta, and he countersued. The agency later dropped the civil proceedings, but reserved the right to refile the case.

The strength of the government’s case is unclear, but details that emerged during Mr. Rajaratnam’s trial were explosive. In their original action, the S.E.C. accused Mr. Gupta of passing confidential information about Goldman and Procter to Mr. Rajaratnam, who then traded on the news. The agency also claimed that Mr. Gupta gave Mr. Rajaratnam advance word of Warren E. Buffett’s $5 billion investment in Goldman during the darkest days of the financial crisis, in addition to other confidential information.

Gary P. Naftalis, a lawyer for Mr. Gupta, said in a statement on Tuesday: “The facts demonstrate that Mr. Gupta is an innocent man and that he acted with honesty and integrity.”

But some of the most powerful evidence for prosecutors may not be presented at trial. Information about Goldman Sachs that the government says came from Mr. Gupta was recorded in phone calls between Mr. Rajaratnam and his employees; as such, the recordings could be inadmissible if Mr. Gupta’s case goes to trial.

In one call that the jury heard in the courtroom, Mr Rajaratnam told someone: “I heard yesterday from somebody who’s on the board of Goldman Sachs that they are going to lose $2 per share.” In a different call, Mr. Rajaratnam said, “I got a call saying something good is going to happen to Goldman.”

Mr. Gupta’s path to the heights of the global business elite began in India shortly after the country’s independence from Britain. He attended the prestigious Indian Institute of Technology before enrolling at Harvard Business School. After graduating near the top of his class, he joined McKinsey and quickly rose up the ranks of the white-shoe consultancy, which advises a large swathe of the Fortune 500 companies on corporate strategy, executive training and other business matters.

In 1994, at the age 45, Mr. Gupta was tapped to lead McKinsey. During his tenure, the firm expanded its global reach, aggressively moving into emerging markets like India and China.

While he oversaw an era of growth at the consulting firm, his reign was not without controversy. McKinsey encouraged Enron’s transformation from a sleepy energy pipeline company into a high-risk trading operation that ultimately collapsed amid an accounting scandal. Jeffrey Skilling, Enron’s former chief executive, was a McKinsey alumnus.

Article source: http://dealbook.nytimes.com/2011/10/26/gupta-surrenders-to-authorities-on-insider-trading/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: douglas healey, k gupta, raj rajaratnam

DealBook: U.S. Expected to Charge Executive With Ties to Galleon

October 26, 2011 by NewsMaker Leave a Comment

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

Federal prosecutors are expected to file criminal charges on Wednesday against Rajat K. Gupta, the most prominent business executive ensnared in an aggressive insider trading investigation, according to people briefed on the case. He is expected to surrender to authorities on Wednesday.

The case against Mr. Gupta, 62, would extend the reach of the government’s inquiry into America’s most prestigious corporate boardrooms. Most of the defendants charged with insider trading over the last two years have plied their trade exclusively on Wall Street.

The charges would also bring to a head a stunning fall from grace of a trusted adviser to political leaders and chief executives of the world’s most iconic companies.

A former director of Goldman Sachs and Procter Gamble and the longtime head of McKinsey Company, the elite consulting firm, Mr. Gupta has been under investigation over whether he leaked corporate secrets to Raj Rajaratnam, the hedge fund manager who was sentenced this month to 11 years in prison for trading on illegal stock tips. While there has been no indication yet that Mr. Gupta profited directly from the information he passed to Mr. Rajaratnam, securities laws prohibit company insiders from divulging corporate secrets to those who then profit from it.

The case against Mr. Gupta, who lives in Westport, Conn, would tie up a major loose end in the long-running investigation of Mr. Rajaratnam’s Galleon Group hedge fund. Yet federal authorities continue their campaign to ferret out insider trading on multiple fronts. This month, for example, a Denver-based hedge fund manager and a chemist at the Food and Drug Administration pleaded guilty to such charges.

A spokeswoman for the United States attorney in Manhattan declined to comment.

Gary P. Naftalis, a lawyer for Mr. Gupta, did not respond to requests for comment. Mr. Naftalis has previously said that his client did nothing wrong.

Mr. Gupta, in his role at the helm of McKinsey, was a trusted adviser to business leaders including Jeffrey R. Immelt of General Electric and Henry R. Kravis of the private equity firm Kohlberg Kravis Roberts Company. An Indian from Kolkata and a graduate of the Harvard Business School, Mr. Gupta has also been a philanthropist, serving as a senior adviser to the Bill and Melinda Gates Foundation. Mr. Gupta also served as a special adviser to the United Nations.

His name emerged just a week before Mr. Rajaratnam’s trial in March, when the Securities and Exchange Commission filed an administrative proceeding against him. The agency accused Mr. Gupta of passing confidential information about Goldman and Procter to Mr. Rajaratnam, who then traded on the news.

The details were explosive. Authorities said Mr. Gupta gave Mr. Rajaratnam advanced word of Warren E. Buffett’s $5 billion investment in Goldman Sachs during the darkest days of the financial crisis in addition to other sensitive information affecting the company’s share price.

At the time, federal prosecutors named Mr. Gupta a co-conspirator of Mr. Rajaratnam, but never charged him. Still, his presence loomed large at Mr. Rajaratnam’s trial. Lloyd C. Blankfein, the chief executive of Goldman, testified about Mr. Gupta’s role on the board and the secrets he was privy to, including earnings details and the bank’s strategic deliberations.

The legal odyssey leading to charges against Mr. Gupta could serve as a case study in law school criminal procedure class. He fought the S.E.C.’s civil action, which would have been heard before an administrative judge. Mr. Gupta argued that the proceeding denied his constitutional right to a jury trial and treated him differently than the other Mr. Rajaratnam-related defendants, all of whom the agency sued in federal court.

Mr. Gupta prevailed, and the S.E.C. dropped its case in August, but maintained the right to bring an action in federal court. The agency is expected to file a new, parallel civil case against Mr. Gupta as well. It is unclear what has changed since the S.E.C. dropped its case in August.

An S.E.C. spokesman declined to comment.

The case could be a challenge for the government. Many of the defendants convicted of insider trading, including Mr. Rajaratnam, have been caught on wiretap swapping secret information.

At Mr. Rajaratnam’s trial, the government played a recorded conversation between Mr. Gupta and the hedge fund manager in July 2008. On that call, Mr. Gupta divulged that Goldman was considering a purchase of either Wachovia or American International Group. Evidence that Mr. Rajaratnam traded on this information was never presented, however.

Two of the most incriminating calls played pertain to alleged tips from Mr. Gupta. But those calls were conversations between Mr. Rajaratnam and his employees, which could make them inadmissible in a trial of Mr. Gupta.

In one call played for the jury, Mr Rajaratnam told a colleague, “I heard yesterday from somebody who’s on the board of Goldman Sachs that they are going to lose $2 per share.” In the other, the hedge fund manager said to his trader, ’”I got a call saying something good is going to happen to Goldman.”

The S.E.C.’s original case also outlined evidence that could potentially be used at trial. That includes Mr. Gupta’s phone records of on Sept. 23, 2008. That day, the Goldman board met via telephone to consider Mr. Buffett’s $5 billion investment in Goldman.

“Immediately after disconnecting from the board call, Gupta called Rajaratnam from the same line,’’ the S.E.C. filing says. A minute later, Galleon funds bought more than 175,000 shares of Goldman just before the market closed, the agency says, and later netted a $900,000 profit when the deal was announced.

Though he had an enviable résumé and earned millions of dollars a year at McKinsey, Mr. Gupta became fixated on the extraordinary wealth showered on hedge fund managers and private equity chiefs. Consultants are well paid, but the compensation pales in comparison to those Wall Street titans.

Around the time of his retirement in 2007, he and Mr. Rajaratnam helped start New Silk Route, a private equity firm focused on investments in India. Though Mr. Rajaratnam never had an active role in the firm, he and Mr. Gupta were good friends, having met through their philanthropic interests.

Mr. Gupta periodically visited Mr, Rajaratnam’s hedge fund, Galleon, on Madison Avenue and 57th Street in Manhattan. The two would order Indian or Chinese takeout and kibitz in Mr. Rajaratnam’s office. Mr. Gupta became an investor in Galleon’s hedge funds.

As part of his foray into Wall Street, Mr. Gupta took a senior adviser post at K.K.R., the firm co-founded by his friend Mr. Kravis. During Mr. Rajaratnam’s trial, prosecutors played a tape of the hedge fund manager gossiping with a friend about Mr. Gupta’s ambitions.

“My analysis of the situation is he’s enamored with Kravis, and I think he wants to be in that circle,” Mr. Rajaratnam said. “That’s a billionaire circle, right?”

William K. Rashbaum contributed reporting.

Article source: http://dealbook.nytimes.com/2011/10/25/gupta-faces-criminal-charges/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: galleon group hedge fund, k gupta, loose end

DealBook: Judge Allows Gupta’s Lawsuit Against S.E.C. to Proceed

July 12, 2011 by NewsMaker Leave a Comment

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

Filed Under: Business News Tagged With: galleon, goldman sachs, k gupta