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Former Goldman official gets two years
Gupta sentenced in insider trading
Question of the Day
NEW YORK — A former Goldman Sachs and Procter & Gamble Co. board member was sentenced to two years in prison Wednesday, culminating a spectacular fall from grace for a man who retained support from prominent business and civic leaders even after he was convicted of feeding inside information about board dealings to a billionaire hedge fund owner who was his friend.
Rajat Gupta, 63, of Westport, Conn., learned his fate from U.S. District Judge Jed Rakoff, who pronounced the more lenient sentence after blasting federal sentencing guidelines that called for Gupta to serve at least 6½ years behind bars. He also ordered him to pay a $5 million fine.
Citing information he received under seal, Judge Rakoff said Gupta's crimes may have occurred because the executive may have "longed to escape the straitjacket of overwhelming responsibility, and had begun to loosen his self-restraint in ways that clouded his judgment."
The Harvard-educated businessman, long respected on Wall Street, was one of the biggest catches yet for the federal government in its five-year crackdown on insider trading that has so far resulted in 69 convictions. Gupta was ordered to report to prison on Jan. 8.
Reading from a statement, he said, "I regret terribly the impact of this matter on my family, my friends and the institutions that are dear to me. I've lost my reputation I built for a lifetime. The verdict was devastating."
The dealings by Gupta that were highlighted at his spring trial stemmed from his relationship with Sri Lanka-born Raj Rajaratnam. The one-time billionaire hedge fund boss controlled up to $7 billion in accounts, giving him a firm footprint in the financial markets and influence that impressed someone as widely regarded as Gupta.
"His conduct has forever tarnished a once-sterling reputation that took years to cultivate," U.S. Attorney Preet Bharara said after sentencing. "We hope that others who might consider breaking the securities laws will take heed from this sad occasion and choose not to follow in Mr. Gupta's footsteps."
Prosecutors described how Gupta raced to telephone Rajaratnam with stock tips sometimes only seconds after getting them from board conference calls, allowing Rajaratnam to make more than $11 million in illegal profits for him and his investors. Rajaratnam is serving an 11-year prison sentence after his conviction last year.
The narrower insider trading case against Rajaratnam and his co-conspirators resulted in 26 convictions and was described by Mr. Bharara as the biggest insider trading case in history, successful in part because of unprecedented use of wiretaps more familiar to juries at mob and drug trials.
Prosecutors say Rajaratnam earned up to $75 million illegally through his trades while Gupta's attorneys point out that their client earned no profits.
At trial, Gupta was convicted of three counts of securities fraud and one count of conspiracy, insider trading charges that prosecutors said should result in a sentence of up to 10 years in prison.
Judge Rakoff said a prison sentence was necessary to send a message to insider traders that "when you get caught, you will go to jail."
Defense attorney Gary Naftalis immediately promised to appeal, telling the court he wants Gupta free pending appealing. The judge refused the request, saying the law did not allow it.
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