Goldman stuck with a defence tab,and awaiting a payback

For Goldman Sachs,the insider trading case against a former board member,Rajat K Gupta,which ended in a conviction on Friday,was distracting and discomforting

Written by New York Times | New York | Published:June 20, 2012 1:25 am

PETER LATTMAN

For Goldman Sachs,the insider trading case against a former board member,Rajat K Gupta,which ended in a conviction on Friday,was distracting and discomforting.

At least until now,it has also been very expensive.

Goldman Sachs has paid for the bulk of Gupta’s legal defense,which has cost nearly $30 million,according to two people with direct knowledge of the case who requested anonymity because they were not authorized to discuss it publicly. Procter & Gamble,on whose board Gupta also served,has picked up the balance of the bill. A jury found Gupta guilty of leaking Goldman’s private boardroom discussions to the former hedge fund titan Raj Rajaratnam. He was acquitted on a count related to divulging secrets about P&G.

Gupta,whose sentencing is scheduled for October 18,plans to appeal.

To say that Goldman Sachs has paid Gupta’s legal bills grudgingly would be an understatement. Not only did Gupta abuse his role as a Goldman director,the jury determined,but Gupta’s lawyers assailed the bank throughout the trial. They depicted Goldman as a cesspool of tipsters feeding Rajaratnam inside information. A defence lawyer called Lloyd C Blankfein,Goldman’s chief executive,who was forced to testify for three days,“cold and callous.”

But with Friday’s guilty verdict,Goldman has moved a step closer to getting paid back. Under a deal reached well before the trial,Gupta agreed that if he was found guilty of insider trading,he would reimburse the bank for the legal fees advanced to him. The bank,however,must continue to pay Gupta’s bills until a final resolution of Gupta’s appeal,a process that could take a couple of years and will surely escalate the costs of his defence.

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