Gupta Gets Two Years|for Inside Trading

     MANHATTAN (CN) – Former Goldman Sachs director Rajat Gupta was sentenced Wednesday to two years for inside trading, and fined $5 million.
     U.S. District Judge Jed Rakoff said at sentencing that Gupta’s lifetime of philanthropy helped reduce his sentence, which could have been eight years.
     “The court can say without exaggeration that it has never encountered a defendant whose prior history suggests such an extraordinary devotion, not only to humanity writ large, but also to individual human beings in their times of need,” Rakoff said. “But when one looks at the nature and circumstances of the offense, the picture darkens considerably.”
     After being orphaned as a child in India, Gupta spent a lifetime building a reputation a titan of finance, and working with dozens of charitable organizations.
     But his reputation crumbled after he gave an inside stock tip to Galleon hedge fund founder Raj Rajaratnam.
     Rajaratnam bought more than $40 million of Goldman Sachs stock in the last minutes of the trading day on Sept. 23, 2008.
     At 3:53 p.m. that day, Gupta finished an emergency conference call with the Goldman Sachs board, in which the members leaned that Warren Buffet and Berkshire Hathaway were investing $5 billion in Goldman Sachs, which was staggered by the financial crisis, and that the bailout would be announced after New York markets closed.
     Gupta called Rajaratnam’s office at 3:54 p.m. – six minutes before the markets closed.
     At 3:56 p.m., Rajaratnam began ordering hundreds of thousands of shares of Goldman stock, for $43 million.
     Rajaratnam is serving an 11-year sentence for serial inside trading crimes.
     On Wednesday, Gupta faced sentencing for his role in the conspiracy, consisting of the Buffett disclosure and lesser tips.
     “The last 18 months have been the most challenging experience of my life, since I lost my parents as a teen-ager,” Gupta told the court.
     Rakoff noted that “several” jurors cried when they delivered a guilty verdict, knowing that it was likely to incarcerate an otherwise sympathetic man.
     Gupta’s wife and four daughters, seated in the front row, wept too as they huddled together during the sentencing hearing.
     Gupta’s attorney Gary Naftalis said that more than 400 letters had asked the judge to show leniency for Gupta’s charitable work.
     Kofi Annan, former Secretary-General of the United Nations, said in his letter, “Millions of people are alive today because of his leadership,” according to Naftalis.
     Annan referred to Gupta’s work at the Global Fund to Fight AIDS, Tuberculosis and Malaria.
     Gupta also served the Public Health Foundation of India, the Indian School of Business, the Cornell Medical School, the Rockefeller Foundation, and other organizations.
     “While some have suggested that the large volume of poignant letters submitted on Mr. Gupta’s behalf are simply the stratagem of a rich, well-connected defendant endeavoring to derail the court from focusing on his crimes, this is simply not the case, for the facts recited in most of the letters are well documented and, indeed, undisputed by the government,” Rakoff said.
     But the judge rejected the defense’s proposal to sentence Gupta to community service in Rwanda. Rakoff called the suggestion a “Peace Corps for inside traders.”
     “If everything you told me about Mr. Gupta’s character is true, and I think it is, he would be doing this without a court order,” Rakoff said.
     Assistant U.S. Attorney Richard Tarlowe said that inside trading needs stiff punishment because the offense is “difficult to detect.”
     Rakoff agreed. “This is a crime easy to commit, hard to catch,” the judge said.
     “The effect of it is to place in jeopardy the integrity of the market,” which creates the popular perception, “Well, it’s all rigged. It’s all fixed.”
     Still, Rakoff said he could not base his sentence on guidelines imposed by Congress, and criticized its “draconian” dictates in narcotics and white-collar crimes in a lengthy prepared statement.
     “Imposing a sentence on a fellow human being is a formidable responsibility. It requires a court to consider, with great care and sensitivity, a large complex of facts and factors,” Rakoff said. “The notion that this complicated analysis, and moral responsibility, can be reduced to the mechanical adding-up of a small set of numbers artificially assigned to a few arbitrarily selected variables wars with common sense.”
     Although it was lighter than prosecutors demanded, U.S. Attorney Preet Bharara said that he hoped other executives got the message.
     “With today’s sentence, Rajat Gupta now must face the grave consequences of his crime – a term of imprisonment,” Bharara said in a statement. “His conduct has forever tarnished a once-sterling reputation that took years to cultivate. 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.”
     Gupta also must serve a year of supervised release after doing his time.
     He is expected to appeal his sentence, challenging the admissibility of wiretap evidence that led to his conviction.

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