Rajat K. Gupta, the most prominent businessman linked to a far-reaching insider trading investigation, is facing criminal charges and surrendered to FBI agents on Wednesday, marking a stunning turn in the aggressive pursuit of white collar by U.S. Attorney Preet Bharara of the Southern District of New York.
Gupta was charged with one count of conspiracy to commit securities fraud and five counts of securities fraud and pleaded not guilty to the charges.
Yet, as momentous as the charges against Gupta are, they would not be a total surprise, as his name has figured prominently in the case of Raj Rajaratnam, the billionaire ex-hedge fund wizard who is headed to federal prison for 11 years for conspiracy and securities fraud.
Indeed, Rajaratnam has said that investigators pressured him intently to implicate Gupta, as Main Justice reported on Tuesday.
Gupta, 62, the longtime head of McKinsey & Company, was a director of Goldman Sachs and Procter & Gamble and a friend of Rajaratnam. The Securities and Exchange Commission accused Gupta, in an administrative proceeding, of passing confidential information on Goldman and P&G to Rajaratnam, who then used that information to glean millions in illicit profits.
The SEC dropped the case against Gupta in August (see our report), for reasons that were not clear. Even so, prosecutors called Gupta a co-conspirator with Rajaratnam during the latter’s trial. Gupta’s lawyers have labeled the accusations against their client baseless and have described him as “an innocent man.”
“It is unclear what has changed since the SEC dropped its case in August,” The Times reported, noting that the SEC declined to comment. But, in view of the government’s tactics against Rajaratnam, the possibility of one or more witnesses against Gupta — perhaps seeking leniency themselves — cannot be ruled out. Rajaratnam was undone by the testimony of former friends and wiretapped conversations in which he was heard discussing confidential data (see our report after his conviction).
The Times said the SEC is expected to file a new civil case against Gupta, which would parallel the criminal case.
Gupta has enjoyed the friendship of some of the most prominent people in the world of business and finance and made millions of dollars a year. But a tape recording of one of Rajaratnam’s conversations during his trial suggested that Gupta wanted to be really rich, as in billionaire.
Michael Horowitz, the nominee for the Justice Department’s Inspector General post, has disclosed as part of his confirmation process that his household net worth is $9.3 million.
The current Cadwalater, Wickersham & Taft partner told the Senate Judiciary Committee that he made $4.6 million in 2010 and the first few months of 2011, according to the Blog of Legal Times.
He listed Pfizer Inc., Cablevision Systems Corp., and Magyar Telekom PLC, a Hungarian telecommunications company, as clients that paid “compensation in excess of $5,000.” In the disclosure, Horowitz also referred to 11 other clients “where the representation involved a grand jury or other non-public investigation and the client name was not made public.”
Horowitz also said that he has $5.2 million invested in securities that mainly consist of mutual funds.
His liabilities amount to $401,000 from mortgages and a car loan.
The Senate Judiciary Committee held a confirmation hearing for Horowitz on October 19, where the nominee said that his relationship with Department of Justice criminal division chief Lanny Breuer would not hinder the DOJ OIG investigation of Operation Fast and Furious, a botched gun-walking operation carried out by the Bureau of Alcohol, Tobacco, Firearms and Explosives.
Five people and four companies with which they are associated have been charged in a conspiracy to illegally ship radio equipment to Iran, from which some of the devices were sent to Iraq to be used in improvised explosive devices, the infamous “IEDs” that have killed and maimed American soldiers, the Department of Justice announced on Tuesday.
The authorities in Singapore have arrested Wong Yuh Lan, Lim Yong Nam, Lim Kow Seng and Hia Soo Gan Benson, all citizens of Singapore, in connection with a U.S. request for extradition to stand trial in the District of Columbia, the DOJ said. The remaining individual defendant, Hossein Larijani, is a citizen and resident of Iran who remains at large.
The indictment, returned in Washington, D.C. on Sept. 15, 2010, and unsealed on Tuesday, includes charges of conspiracy to defraud the United States, smuggling, illegal export of goods from the United States to Iran, illegal export of defense articles from the United States, false statements and obstruction of justice, the DOJ said.
“Today’s charges allege that the defendants conspired to defraud the United States and defeat our export controls by sending U.S.-origin components to Iran rather than to their stated final destination of Singapore,” said Lisa Monaco, Assistant Attorney General for National Security. “Ultimately, several of these components were found in unexploded improvised explosive devices in Iraq.”
The U.S. Ambassador to Singapore, David Adelman, praised the cooperation within the U.S. executive branch agencies and with the Singaporean authorities. “Twenty-first century law enforcement is most effective when countries work collaboratively as evidenced by this strong, cooperative effort between the U.S. and Singapore,” he said.
Joshua David Evans was known as the “Head God” of the uploaders, while Jeremy Lynn Andrew was “Ninja Head of Security,” perhaps suggesting they thought they were engaged in good, clean fun or, at worst, schoolboy pranks.
Now, Evans, 34, and Andrew, 33, may be bound for detention — not the after-school, classroom kind but grown-up style detention, as in five years each in federal prison, plus hundreds of thousands of dollars in fines and restitution payments for copyright violations.
Evans, of North Bend, Wash., and Andrew, of Eugene, Ore., pleaded guilty on Tuesday in the Eastern District of Virginia for their roles in NinjaVideo.net, a website that let millions of users illegally download copies of copyright-protected movies and television programs in high-quality formats, the Department of Justice announced. (Some Internet servers used in the conspiracy were located in Virginia, the DOJ said.)
Evans and Andrew oversaw an operation that took in hundreds of thousands of dollars, investigators said. Two other defendants have already pleaded guilty. They, like Evans and Andrew, will be sentenced over the next few months. A warrant has also been issued for still another suspect, who lives in Greece, the DOJ said.
Swiss banks appear to be ready to settle a far-reaching investigation by paying billions of dollars and turning over to U.S. authorities the names of thousands of American tax-evaders, according to a report in Bloomberg.
“U.S. and Swiss officials are concluding negotiations on a civil settlement amid U.S. criminal probes of 11 financial institutions, including Credit Suisse Group AG, suspected of helping American clients hide money from the Internal Revenue Service, according to five people with knowledge of the talks who declined to speak publicly because they are confidential,” Bloomberg said.
The level of detail and specificity cited in the Bloomberg report suggests that major developments in the investigation may be imminent. It has been known for months that a major inquiry into Swiss banking activities was under way, as Main Justice reported. Earlier this year, the Swiss reached accords with Germany and the United Kingdom.
“The Swiss would like to get out of this by paying money, and they’ve done that with other countries,” tax attorney H. David Rosenbloom of Washington’s Caplin & Drysdale, who is not involved in the talks, told Bloomberg. “For the U.S., it’s not primarily a money question. It’s a matter of making sure the laws apply fairly among taxpayers.”
For the moment, Swiss bankers seem intent on preserving their image of buttoned-down discretion (or cynical secrecy, depending on one’s perspective) involving money. And several thousand Americans may be trying to keep their composure as they dial their lawyers.
An attorney who co-authored a controversial U.S. Chamber of Commerce paper proposing changes to the nation’s foreign bribery statute has been appointed the FBI’s general counsel.
Andrew Weissmann, who had been co-chair of Jenner & Block’s white collar defense and investigations practice and a member of its management committee, left the firm Sunday, according to Am Law Daily. The previous FBI general counsel, Valerie Caproni, left the FBI to work as a general counsel for Northrop Grumman earlier this month. Weissmann is the former director of the federal government’s Enron task force.
Last year, working for the Chamber, Weissmann wrote a paper with Alixandra Smith of Jenner & Block proposing changes to the Foreign Corrupt Practices Act, the 33-year-old law that prohibits bribes to foreign officials to obtain or retain business.
In its report “Restoring Balance: Proposed Amendments to the Foreign Corrupt Practices Act” the Chamber it said that the FCPA is a costly burden to business and “there is also reason to believe that the FCPA has made U.S. businesses less competitive than their foreign counterparts who do not have significant FCPA exposure.” The paper called for five specific reforms including limiting a company’s “successor liability” for the prior actions of a firm it has acquired and giving a clear definition of “foreign official” under the statute.
The Open Society Foundations, a George Soros-funded organization issued a report, charging that that Weissmann’s plan would “significantly reduce the scope and efficacy of the FCPA while substantially undermining more than 30 years of successful U.S. leadership in promoting global anti-corruption standards. “[T]he Chamber’s proposal looks more like a license to commit pervasive and intentional bribery than a modest attempt to eliminate the risk of prosecutorial over-reach,” the report said.
Weissmann previously worked with FBI Director Robert Mueller while serving as his special counsel in 2005, after the Enron task force’s work was completed.
While heading that special investigative committee, Weissmann oversaw the prosecutions of Enron executives Kenneth Lay, Jeffrey Skilling and Andrew Fastow.
Before the Enron task force was formed, Weissman spent 15 years working for the U.S. Attorney’s Office for the Eastern District of New York, serving as the criminal division chief from 2000 until 2003.
Susan Levy, Jenner’s managing partner at Jenner & Block said that the firm will “miss him greatly but congratulate him on this wonderful achievement.”
From the moment he was arrested on Oct. 16, 2009, and taken away from his family until just before he was sentenced to prison, Raj Rajaratnam was under intense pressure to incriminate others whom the government suspected of insider trading, he recalled.
In particular, the authorities were after Rajat K. Gupta, and so they dangled the prospect of leniency in front of Rajaratnam — if only he would wear a wire and help nail Gupta, a former director of Goldman Sachs and Procter & Gamble who, the government says, conspired with Rajaratman. So why didn’t Rajaratnam cooperate?
“I am not going to do what people did to me,” Rajaratnam recalled thinking. “Rajat has four daughters.” And despite the government’s suspicions, Gupta is “a first-class person,” Rajaratnam said. (Gupta faced administrative charges from the Securities and Exchange Commission until they were dismissed in August, charges that his lawyer called baseless, as Main Justice reported.)
So instead of helping investigators get Gupta, Rajaratnam spurned their offer “so he could sleep at night,” as he recounted in an interview with Suketu Mehta of Newsweek, reported on The Daily Beast.
On Oct. 13, Rajaratnam was sentenced to 11 years in prison on the 14 counts of conspiracy and securities fraud that were brought by the office of U.S. Attorney Preet Bharara of the Southern District of New York. A jury convicted Rajaratnam, once a famed and immensely wealthy hedge fund titan, last May.
To hear Rajaratnam tell it, the pressure on him began the very moment a knock on the door interrupted his exercise-bike workout that early morning of Oct. 16, 2009. A posse of FBI agents had come to take him away. “Take a good look at your son,” an agent said, in Rajaratnam’s version of events. “You’re not going to see him for a long time.”
“Your wife doesn’t seem so upset,” the agency said, “because she’s going to spend all your money.”
The authorities dispute that story, according to The New York Post. “A number of his assertions are inaccurate,” said Ellen Davis, spokeswoman for Bharara. And Jim Margolin, a spokesman for the FBI in New York, said that comments Rajaratnam attributed to agents “were never uttered.”
One part of Rajaratnam’s story has the ring of certainty. He recalled that, at the beginning of an eight-hour interrogation, agents set a laptop in front of him and began replaying telephone calls in which Rajaratnam was heard discussing confidential information that the authorities said he used to make millions in illicit profits. The investigators had dozens of such tapes (see our earlier report), some made with the cooperation of Rajaratnam’s erstwhile friends who, unlike him, had chosen leniency over loyalty.
A five year-old federal investigation into Sen. Bob Menendez’s (D-N.J.) ties with a non-profit has been closed.
Zane David Memeger, U.S. Attorney’s Office in Eastern Pennsylvania, told Menendez’s lawyer that he “decided to close the file” on the politically charged probe, according to a report in the Newark Star-Ledger.
The probe was opened by then-New Jersey U.S. Attorney and current Governor Chris Christie (R-N.J.). When current New Jersey U.S. Attorney Paul Fishman succeeded Christie, he recused himself from the case because he had been recommended for his job by Menendez.
Menendez was investigated by federal prosecutors for allegedly improperly obtaining federal funding for North Hudson Community Action Corp., a non-profit that had rented office space from the senator between 1994 and 2003.
Menendez, a House member 1993 until 2006, had the deal approved by the House ethics committee and maintained that he had done nothing wrong.
The probe has been a hot-button political issue in the state. Menendez accused Christie of abusing his power by leaking the investigation to give Kean a boost.
The political backlash toward the Justice Department’s plan to consolidate several offices has begun, as Rep. Dennis Kucinich (D-Ohio) has sent a letter to Attorney General Eric Holder protesting the department’s plan to close its Cleveland antitrust division office.
In his letter, Kucinich asked Holder to reconsider his decision to close any department field offices, saying that attorneys in those offices have close ties to their communities. He said that many of the attorneys who will be asked to transfer to new offices may simply decide to leave the department.
“Simply losing these professionals is bad enough; to think that some might use their knowledge of the law to defend wrongdoers without field offices nearby to prosecute is outrageous,” he wrote.
Kucinich said that the Cleveland DOJ antitrust office is located in a federal courthouse. “The federal government loses money when we have empty office space there,” he wrote.
“The Cleveland Field Office and other antitrust field offices are vital presences in their communities,” he wrote.
