Rajat Gupta begins jail term after losing in insider trading appeal
18 Jun 2014
Rajat Gupta, the former Goldman Sachs director convicted of insider trading in the US, on Tuesday began his two-year jail term for insider trading after losing his appeal against paying nearly $14 million in civil penalties and being banned on serving as a public company officer.
India-born Gupta, 65, will now have to pay $13.9 million as penalty in the US Securities & Exchange Commission's parallel insider trading case against him, in addition to the 45 million fine in the criminal case and $6.2 million as restitution to Goldman Sachs.
A three-judge bench of the US Court of Appeals for the 2nd Circuit 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 $13.9 million civil penalty, equal to three times the profits gained and losses avoided by one-time billionaire hedge fund founder Raj Rajaratnam.
In fact, reports say Gupta will be incarcerated in a jail compound adjacent to the one where Rajaranam is serving an 11-year sentence.
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 told PTI 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".
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."
Gupta began his prison sentence after fighting a protracted legal battle to clear his name in one of the biggest insider trading cases in US history.
The IIT Delhi and Harvard alumnus has been assigned to the minimum security satellite camp near the centre, where his former business associate Rajaratnam is currently serving his 11-year jail term on insider trading conviction.
Gupta was convicted in 2012 after a jury trial of passing confidential information about Goldman Sachs to Rajaratnam just minutes after he learned about them at the financial giant's board meetings.
According to the camp's rules, Gupta will be able to receive family and friends on Saturdays, Sundays and federal holidays between 8:30 am to 3:00 pm and on Fridays between 2:30pm and 8:30pm.
Normally, only five visitors, including children, are allowed to visit an inmate at any given time.