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| Rajat Gupta |
Former McKinsey & Company chief Rajat Gupta is an alleged tipster in the Raj Rajaratnam Galleon Group case. As we earlier reported, the Securities and Exchange Commission has filed an administrative action against Gupta, rather than indicting him in the criminal case. Gupta subsequently filed a lawsuit asking U.S. District Judge Jed Rakoff to force the SEC to try Gupta in a jury trial rather than resort to an administrative action. The action is slated for July 18.
On Friday, the SEC responded with a filing of its own, arguing that Gupta cannot escape the administrative proceedings, and that Judge Rakoff lacks jurisdiction to stop it.
Of the 24 individuals sued in the SEC case against Galleon, only Gupta is facing an administrative action rather than a jury trial lawsuit. Observers agree that administrative actions tend to favor the SEC, as opposed to a jury trial. Regarding Gupta’s request for a trial, SEC lawyer Richard Humes declared:
"Even if he gets the ruling he is asking for, it doesn't stop the rest of the proceedings."
Humes and fellow attorney Christopher Bruckmann maintain that Gupta has recourse to appeal decisions of administrative proceedings in federal court, not district court.
"Gupta is essentially seeking to convert potential factual, legal and constitutional defenses to an administrative proceeding to a claim that he is entitled to immediate" relief in federal court.
Gupta has steadfastly denied doing anything wrong. Judge Rakoff has in the past appeared sympathetic to Gupta’s claims, calling “bizarre” the singling out of Gupta for administrative action and commenting:
"23 of them are charged in federal court where they have the right to a jury trial, and one of them is not and is charged only in an administrative proceeding. Does that implicate the equal protection clause of the Constitution as well as a jury trial clause of the Constitution?"
It is anticipated that Gupta will testify for the defense in the Galleon trial. Previously, the prosecution played an 18-minute tape to the jury with Gupta and Rajaratnam speaking about insider topics. At the time, Gupta was on the board of Goldman Sachs, and therefore had a duty to protect Goldman’s secrets. The Gupta tape contains a discussion of Goldman possibly acquiring both Wachovia Corp. and insurance behemoth American International Group.
© 2011 Hedge Fund Writer LLC
