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Former Goldman Sachs director sues SEC over Galleon hedge fund case

Rajat Gupta says the SEC, which has accused him of leaking inside information, has "unfairly and unconstitutionally" singled him out.

March 18, 2011|By Nathaniel Popper, Los Angeles Times

Reporting from New York — — A former Goldman Sachs Group Inc. director accused of leaking confidential information is suing the Securities and Exchange Commission, saying the agency "unfairly and unconstitutionally" singled him out.

The SEC has accused Rajat Gupta, former head of consulting firm McKinsey & Co., of giving inside information about Goldman to his friend and business partner Raj Rajaratnam.

Rajaratnam, former head of the Galleon hedge funds, is on trial on 14 counts of insider trading. He has denied any wrongdoing.

Gupta's suit, filed Friday in federal court in Manhattan, says the agency's decision to bring its case before an SEC administrative judge instead of in federal court, where dozens of other Rajaratnam associates have been charged, will deny him a number of legal protections, such as a jury trial.

Since the SEC filed the case this month on the eve of Rajaratnam's trial, Gupta has resigned from a number of corporate boards, including those of Procter & Gamble and American Airlines' parent company.

The SEC alleges that Gupta called Rajaratnam soon after Goldman and P&G board meetings to pass along information that allowed Rajaratnam to make millions of dollars in trading gains.

Prosecutors at Rajaratnam's trial have played recordings of phone calls in which Gupta can be heard telling Rajaratnam confidential details of Goldman's business plans.

But Gupta's suit says "there is no plausible reason why Mr. Gupta would have deviated from a lifetime of probity and a career dedicated to safeguarding corporate confidences in favor of engaging in the significant and aberrational wrongdoing alleged."

The SEC declined to comment on the suit.

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