The SEC has announced that former Goldman Sachs board member Rajat Gupta has been convicted of insider trading and is ordered to pay $13.9 million to settle related civil charges of tipping corporate secrets to his friend and business associate Raj Rajaratnam.
In addition to the financial penalty, the order enjoins Gupta from future violations of the securities laws, and permanently bars him from acting as a director of a public company and from associating with any broker, dealer, or investment adviser.
“The sanctions imposed send a clear message to board members who are entrusted with protecting the confidences of the companies they serve,” said George S. Canellos, Co-Director of the SEC’s Division of Enforcement. “If you abuse your position by sharing confidential company information with friends and business associates in exchange for private gain, you will be prosecuted to the fullest extent by the SEC.”
In a parallel criminal case, Gupta is in the process of appealing his June 2012 conviction and two-year prison sentence for having fed these confidential tips he learned while at Goldman Sachs to Rajaratnam. The SEC provided significant assistance to the US Attorney’s Office for the Southern District of New York in its successful criminal prosecution of Gupta.
In its complaint filed in late 2011, the SEC alleged that the information Gupta provided included news about Goldman’s financial results and in particular a crucial $5 billion investment by Warren Buffet’s Berkshire Hathaway Inc. at the height of the financial crises in 2008.
Gupta’s criminal sanctions also included a $5 million fine.
Rajaratnam is currently serving a sentence of more than 11 years after he was convicted in 2011 of conspiracy and multiple counts of securities fraud. Rajaratnam was the highest-ranking financial executive convicted in a multi-year federal crackdown on insider trading.
The SEC in 2011 won a $92.8 million civil penalty against Rajaratnam, then a record for an SEC insider trading case.