The US Securities and Exchange Commission (SEC) has dropped its administrative action against former Goldman Sachs director Rajat Gupta, in the hedge fund billionaire Raj Rajaratnam linked insider trading probe, but said it could still pursue charges against him in court.
In a two page filing, the SEC said, "the Commission has determined that it is in the public interest to dismiss these proceedings," which it had initiated against the Indian American in March this year.
The SEC, however, added that "dismissing these proceedings will not prevent the Commission from filing an action against Gupta in United States District Court."
On his part, according to court papers filed, Gupta has also agreed to drop his lawsuit against the SEC challenging the administrative action. Responding to the SEC move, Gupta's lawyer Gary Naftalis said in a statement that his client is "very pleased that as a result of his lawsuit, the SEC has dismissed its administrative proceeding and he will no longer be singled out for disparate treatment."
Naftalis pointed out that the "SEC's allegations are totally baseless and cannot withstand scrutiny." "If the SEC should refile any of the charges against Gupta, it must do so in federal court, where he will have a right to a jury trial, the right to depose witnesses, the protection of the federal rules of evidence—procedural safeguards not available in an administrative proceeding. Gupta's lawsuit against the SEC has achieved all of the relief he sought," Naftalis added.
The SEC had brought the administrative case against Gupta, alleging he provided insider tips to Galleon Group founder Rajaratnam about Goldman Sachs, including an investment by Warren Buffett's Berkshire Hathaway.
Rajaratnam was found guilty of criminal insider trading charges in May.
Gupta had fired back at the SEC, filing a lawsuit on March 18 against the Commission in the US district court for the southern district of New York challenging the institution of these proceedings.
In his lawsuit, Gupta had said the SEC had denied him his right to a jury trial and was treating him differently from the other defendants in the Rajaratnam case.
Last month, the case's presiding judge Jed Rakoff had issued a ruling that allowed Gupta’s lawsuit to proceed and had criticized the SEC for initiating the administrative proceeding instead of a federal lawsuit.
No criminal charges have been filed against Gupta, who was called an unindicted co-conspirator of Rajaratnam.