Democratic Donor Rajat Gupta Pays $13.9M Penalty

Former Golden Sachs board member sanctioned for illegal disclosures

Rajat Gupta, right, and his lawyer / AP
• July 18, 2013 12:35 pm

Former Goldman Sachs board member and Democratic donor Rajat Gupta has been ordered to pay a $13.9 million civil penalty for illegal disclosures of financial information to a former hedge fund manager, the Securities and Exchange Commission said Wednesday.

The order issued by U.S. District Court Judge Jed Rakoff also forbids Gupta from serving as an officer or director of a public company, the regulator stated in a release. Gupta is appealing his June 2012 conviction in a parallel criminal case; he was sentenced to a two-year prison term and ordered to pay a $5 million criminal fine in October.

Gupta contributed $86,100 to candidates and committees between 1990 and 2008, all but one with Democratic ties, according to the Center for Responsive Politics. Those contributions included $2,500 to President Barack Obama in 2008 and $30,000 to the Democratic Congressional Campaign Committee.

He donated nearly $15,000 to Democratic candidates in the 2010 and 2012 election cycles.

The SEC alleged that Gupta, also a former director of the consulting firm McKinsey & Co., illicitly tipped former billionaire hedge fund manager Raj Rajaratnam about Berkshire Hathaway Inc.’s $5 billion investment in Goldman Sachs and Goldman’s quarterly financial results in 2008.

"The sanctions imposed today 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, in the release.

Rakoff found Rajaratnam liable in 2011 for $92.8 million related to insider trading at his hedge fund advisory firm Galleon Management, the largest ever penalty assessed against an individual in a SEC insider trading case. He was sentenced to 11 years in prison that same year.

Rajaratnam’s conviction was the result of a probe into a more systemic insider-trading scheme. The SEC alleged that the scheme involved the securities of more than 15 publicly traded companies for more than $90 million in illegitimate profits or losses avoided.

Gary Naftalis, a lawyer for Gupta, did not return a request for comment.