SEC imposes $13.9m penalty on former Goldman Sachs director

Rajat Gupta barred from serving as director/officer of a public firm for violating US securities laws.

New Statesman
Rajat Gupta, former director of Goldman Sachs Group. Credit: Getty Images.

The Securities and Exchange Commission (SEC) has imposed a financial penalty of $13.9m on former director of Goldman Sachs Group Rajat Gupta for illegally ‘tipping corporate secrets’ to Raj Rajaratnam and permanently barred him from serving as an officer or director of a public company.

The US regulator permanently barred Gupta from associating with any broker, dealer, or investment adviser, for violation of the US securities laws.

Rajaratnam, who is currently serving his 11-year jail sentence, was fined $92.8m by the SEC for widespread of insider trading information in November 2011.

George Canellos, co-director of division of enforcement at SEC, said: “The sanctions imposed today send a clear message to board members who are entrusted with protecting the confidences of the companies they serve. 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 its complaint filed in 2011, the US regulator alleged that Gupta shared confidential business information with Rajaratnam about Berkshire Hathaway’s $5bn investment in Goldman Sachs as well as nonpublic details about Goldman Sachs’ financial results for the second and fourth quarters of 2008.

In June 2012, the US Attorney’s Office for the Southern District of New York in its criminal prosecution, found Gupta guilty of passing confidential information related to Goldman Sachs board meetings. He was then sentenced to imprisonment for two years.

In December last year, the SEC ordered Rajaratnam to distribute his share of the profits plus interest secured from Gupta’s tips.

The SEC order was issued by Jed S. Rakoff, a judge of the US District Court for the Southern District of New York.