Former Goldman Sachs Indian-American board member Rajat Gupta
, convicted of insider trading has been fined $13.9 million to settle related civil charges of feeding inside information to his friend, a billionaire hedge fund boss, Raj Rajaratnam.
The Securities and Exchange Commission announced the fine on Wednesday against Gupta, who was also permanently barred from serving as an officer or director of any public company. Gupta, a former chief of global consulting firm McKinsey & Co., was one of the biggest catches for the federal government in its five-year crackdown on insider trading that has brought about 70 criminal convictions.
Gupta was sentenced in October to two years in prison for passing confidential information
gained from his position as a Goldman director to Raj Rajaratnam, founder of the Galleon group of 14 hedge funds. Gupta, who also had been a director of consumer products giant Procter & Gamble, was also ordered to pay a $5 million criminal fine.
Prosecutors said that Rajaratnam, who is serving an 11-year prison sentence, illegally reaped as much as $75 million through his trades, including about $11 million from the information provided by Gupta. The case revolving around Rajaratnam and the Galleon funds has been called the biggest insider trading prosecution in US history. Rajaratnam was fined $10 million in his criminal case and ordered to forfeit $53.8 million. He also paid a record $92.8 million civil penalty levied by the SEC.
Gupta's attorneys noted at his trial that he earned no profits from the scheme. Prosecutors accused Gupta of "above-the-law arrogance" in passing inside tips to Rajaratnam between March 2007 and January 2009. The advance information concerned a $5 billion investment by billionaire investor Warren Buffett's Berkshire Hathaway Inc. in Goldman and Goldman's financial results for the second and fourth quarters of 2008.
"The sanctions imposed today send a clear message to board members who are entrusted with protecting the confidences of the companies they serve," George Canellos, co-director of the SEC's enforcement division, said in a statement.
Gupta's conviction marked a spectacular fall from grace for the Harvard-educated businessman, who was born in Kolkata, India. More than 400 letters were written on his behalf to the federal judge hearing his case, including documents signed by Microsoft co-founder Bill Gates and former UN Secretary-General Kofi Annan.With AP inputs