Rajat Gupta, former Goldman Sachs Director and a one-time poster boy of Indians in the US, has begun his two-year jail term for insider trading while losing his appeal against paying nearly USD 14 million in civil penalties and ban on serving as a public company officer.
India-born Gupta, 65, will now have to pay USD 13.9 million as penalty in the US Securities and Exchange Commission’s parallel insider trading case against him, in addition to the USD five million fine in the criminal case and USD 6.2 million restitution to Goldman Sachs.
A three-judge bench of the US Court of Appeals for the 2nd Circuit, on Tuesday, denied Gupta’s plea to overturn the decision of the district court that had imposed a permanent injunction prohibiting the former McKinsey head from serving as an officer or director of a public company, associating with brokers, dealers or investment advisors, and further violating securities law.
The district court had also ordered Gupta to pay the USD 13.9 million civil penalty, equal to three times the profits gained and losses avoided by one-time billionaire hedge fund founder, Raj Rajaratnam. The setback for Gupta came the same day he reported to the Federal Medical Center-Devens in Ayer, Massachusetts, to begin his two-year prison sentence on insider trading charges.
A spokesperson for the centre said that Gupta had “surrendered” to the prison on Tuesday. Gupta was undergoing routine medical tests, which could take a day to be completed. Following the tests, Gupta will be lodged in the satellite camp near the centre.
According to initial information available on the facility’s website, Gupta has been described as a 65-year old “Asian male”. Gupta’s appeal was denied by the appeals court, a day after hearing arguments from his lawyer Seth Waxman and the SEC. The judges Barrington Parker,
Denny Chin and William Sessions said in their order that “we find no abuse of discretion in the imposition of injunctive relief and civil
penalties on Gupta by the district court. We have considered Gupta’s remaining arguments and find them to be without merit.”
“Accordingly, we affirm the judgement of the district court,” the judges said in their six-page order. Gupta began his prison sentence after fighting a protracted legal battle to clear his name in one of the biggest insider trading schemes in US history.
The judges said that the district court reasonably concluded that “Gupta remains well-placed to repeat his misconduct in the future.” They added that the district court also was not wrong in imposing the treble civil penalty since “a tippee’s gains and losses avoided are ‘attributable to the tipper, regardless whether benefit accrues to …continued »