Goldman Sach

Justice Served Up February 26 2013

English: Rajat Kumar Gupta, Chairman of the Board, The Global Fund to Fight AIDS, Tuberculosis and Malaria; Senior Partner Emeritus, McKinsey & Company, USA; Member of the Foundation Board of the World Economic Forum, captured during the session 'Completing the Malaria Mission' at the Annual Meeting 2009 of the World Economic Forum in Davos, Switzerland, January 31, 2009. (Photo credit: Wikipedia)

Here is what we are reading today on white-collar crime:

Rajat Gupta Told to Pay Restitution to Goldman Sachs (DealBook) - A federal judge on Monday ordered Rajat Gupta, the former Goldman Sachs director, to pay the bank more than $6.2 million to reimburse it for legal expenses connected to his insider trading case. Last May, a jury convicted Mr. Gupta, 64, of leaking boardroom secrets about Goldman to the hedge fund manager Raj Rajaratnam. The presiding judge, Jed S. Rakoff, sentenced Mr. Gupta to two years in prison. He free on bail while he is appealing the conviction.

The Challenge of Sentencing White-Collar Felons (DealBook) - Are white-collar defendants treated more favorably than other criminals when it comes to sentencing? A case involving the chief executive of a technology firm in Ohio that collapsed in 2003 after fraud allegations seems to indicate that perhaps there is such a thing as being too lenient, according to a Federal Appeals Court. The recent case involves Michael E. Peppel, the former chairman and chief executive of MCSi, who pleaded guilty to conspiracy, money laundering and filing false documents with the Securities and Exchange Commission. Federal authorities said he inflated revenue and earnings to prop up MCSi’s stock price at a time when the company was failing after years of having grown through acquisitions.

Organic Food Fraud Hits Europe (Reuters) - The northern state of Lower Saxony, a major agricultural hub, has launched probes of some 150 farms suspected of wrongly selling eggs produced by hens kept in overcrowded conditions under the organic label. Two other states are investigating a further 50 farms. "If the accusations (against the farms) are found to be true, then we are talking of fraud on a grand scale: fraud against consumers but also fraud against the many organic farmers in Germany who work honestly," German Farm Minister Ilse Aigner said in a statement on Monday. Probably a problem here in the U.S. as well.

Tags:

US Securities and Exchange Commission

Section:

Fraud

Is Raj Rajaratnam In The Driver's Seat in Gupta Case?

NEW YORK, NY - MARCH 08: Billionaire Galleon Group hedge fund cofounder Raj Rajaratnam departs Manhattan Federal Court at the end of the first day of his trial on insider trading charges March 8, 2011 in New York City. Prosecutors allege that Rajaratnam pocketed $45m by illegally trading on insider stock tips. (Image credit: Getty Images via @daylife)

On December 5, 2011, hedge fund founder (Galleon Group) Raj Rajaratnam entered federal prison in Massachusetts to begin serving an 11-year prison term. During Rajaratnam's trial, a number of his former friends/business associates cooperated with the government in order to get a reduced sentence. Now, it may be Rajaratnam who is offered a sweetheart deal to sort things out for the government.

Rajat Gupta, former McKinsey & Company managing director, former Goldman Sachs director, former Proctor & Gamble director, is accused of passing insider information on to Raj Rajaratnam at Galleon. The trial is expected to start on May 21, and the allegations are that Gupta passed inside information on to Rajaratnam about both Proctor & Gamble and Goldman Sachs. That leak, the government alleges, allowed Rajaratnam to make millions of dollars in stock trades. But there is a new twist to the case. The government prosecutor, Reed Brodsky, told Judge Jed S. Rakoff yesterday that there is another Goldman Sachs employee that also passed illegal tips to Rajaratnam .... thus providing Gupta with the out that, "Raj must have used the other guy's tip because I wasn't the source of the leak." In a criminal proceeding, the defense wins if there is reasonable doubt as to "guilt" .... this revelation certainly helps that cause.

There is only one person who can sort this out and he is currently sitting in prison; Raj Rajaratnam. The government now needs Rajaratnam to step forward and testify as to whether he got inside information from Gupta, or the "other" Goldman employee, or neither of them. Raj can either come forward and throw his long time friend, Gupta, under the bus and thereby get an early release from prison .... or he can testify and clear his friend and continue on with his 11 year sentence .... or he can stay in prison and say nothing.

It is an interesting turn of events, because now we are not sure if Rajaratnam's testimony will help Gupta or the government. Either way, he's still in control ... just like the old days.