Lawyers for Rajat K. Gupta, a wealthy business consultant who has been accused of insider training in the far-reaching case that has put the billionaire hedge fund maestro Raj Rajaratnam on trial, moved in federal court on Friday to have the Securities and Exchange Commission’s case against Gupta thrown out.
In a complaint filed in U.S. District Court for the Southern District of New York, Gupta’s lawyers said the SEC’s filing of administrative charges against their client “unfairly and unconstitutionally” singled him out, deprived him of “the most fundamental rights” and was a bad-faith attempt by the SEC to prop up a case without merit.
Accordingly, Gupta’s lawyers said, the agency should be enjoined from moving against their client and he should be granted a jury trial, a venue in which he could knock down the accusations against him through discovery and other procedures unavailable in the SEC proceeding.
Moreover, the lawyers said, the SEC action is based on the Dodd-Frank bill, which only took effect last July, even though the improper actions alleged by the agency — which Gupta denies in any event — took place well before that.
John Nester, an SEC spokesman, said the agency had no immediate comment.
The SEC brought the action against Gupta on March 1, as Main Justice reported. Gupta once served on the boards of Goldman Sachs and Procter & Gamble and, the SEC alleged, tipped his friend Rajaratnam about Goldman Sach’s and P&G’s earnings, as well as an impending $5 billion investment by Berkshire Hathaway in Goldman Sachs.
In the ongoing criminal trial of Rajaratnam, on charges that could put him behind bars for 20 years upon conviction, prosecutors have labeled Gupta a co-conspirator with Rajaratnam, although they have not charged him.
A number of traders caught up in the long inquiry that brought Rajaratnam, the founder of Galleon Group LLD, to trial have already pleaded guilty and are on the government’s witness list. Judge Richard J. Holwell is presiding over the trial. The case is seen as a big challenge for Preet Bharara, the U.S. Attorney for the SDNY.
Friday’s motion against the SEC was signed by Gary P. Naftalis of Kramer Levin Naftalis & Frankel LLP.
For what it’s worth, the SEC administrative charge against Gupta was described as “bizarre” this week by Judge Jed Rakoff of the SDNY, as recounted by Bloomberg’s Patricia Hurtado.
“I don’t understand why Mr. Gupta is the subject of an administrative proceeding before the SEC while everyone else is the subject of a proceeding before a district court judge,” Rakoff said Wednesday at a hearing in the SEC’s case against Adam Smith, a former Galleon trader.
Well, your honor, an SEC lawyer said, that decision “was made by others above me.”Anyhow, the lawyer went on, the SEC has the authority to decide what action it wants to take.
“What you just said was not an answer to my question,” Rakoff replied. “On its face, it’s sort of bizarre, but there it is.”
