A federal judge on Monday ordered Rajat K. Gupta, a former Goldman Sachs director, to pay the bank more than $6.2 million to reimburse it for legal expenses connected to his insider trading case.
Last May, a jury convicted Mr. Gupta, 64, of leaking boardroom secrets about Goldman to the hedge fund manager Raj Rajaratnam. The presiding judge, Jed S. Rakoff, sentenced Mr. Gupta to two years in prison. He free on bail while he is appealing the conviction.
Goldman had sought $6.9 million in reimbursement from Mr. Gupta, which represented the total amount that the bank had paid to its primary outside counsel at the law firm Sullivan & Cromwell for an internal investigation and other legal expenses. The bank filed the claim based on the Mandatory Victims Restitution Act, a law that allows corporations to get reimbursed as a victim of an insider trading crime by a rogue employee.
After reviewing the firm’s 542 pages of billing records related to the case, Judge Rakoff said that Mr. Gupta raised no “colorable challenge to the veracity of the records.” He cut the bill by 10 percent, he said, because he noted that there were some extraneous entries.
“On a few occasions,” Mr. Rakoff wrote, “the number of attorneys staffed on a task – while perhaps perfectly appropriate on the assumption that Goldman Sachs wished to spare no expense on a matter of great importance to it – exceeded what was reasonably necessary” under the statute.
Michael Duvally, a Goldman spokesman, said the bank was pleased the court ordered Mr. Gupta to pay it restitution. Gary P. Naftalis, a lawyer for Mr. Gupta, declined to comment.
Goldman is not the only bank that has asked to get paid back because of an employee’s insider trading crimes. Last March, a federal judge ordered that Joseph F. Skowron, a former Morgan Stanley hedge fund manager, pay the bank $10.2 million in legal fees and a portion of his past compensation. Mr. Skowron is appealing the ruling.
The money that Mr. Gupta now has to pay Goldman is separate from the cost of Mr. Gupta’s legal defense, which has thus far exceeded more than $30 million. That legal tab has been paid for by Goldman because the bank’s bylaws require it to pay the legal fees of its top officers and directors. But under a deal reached before his trial, Mr. Gupta agreed that if he was found guilty of insider trading, he would reimburse the bank for the legal fees advanced to him. Goldman must continue to pay his bills until the resolution of his appeal.
Mr. Gupta should be able to afford the $6.2 million payment to Goldman. In April 2008, he had a net worth of about $84 million, according to testimony during the trial. But the case also revealed that his assets took a major hit during the financial crisis.
For Goldman, Mr. Gupta’s case was a huge distraction. Among other hassles, the bank’s chief executive, Lloyd C. Blankfein, was forced to testify over three days in Federal District Court in Manhattan, reviewing for a jury the details and sanctity of Goldman’s boardroom discussions.
DealBook: Gupta Ordered to Reimburse Goldman Sachs $6.2 Million
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DealBook: Gupta Ordered to Reimburse Goldman Sachs $6.2 Million
