On Monday, a federal judge ordered former Goldman Sachs Group Inc. director Rajat Gupta to reimburse $6.22 million to help the Wall Street bank cover its legal expenses related to his criminal insider trading case.
Goldman had sought to recover $6.91 million, and U.S. District Judge Jed Rakoff in Manhattan said the bank had proved it was entitled to 90 percent of what it requested.
Gupta, 64, is appealing his June 15, 2012 conviction and two-year prison term for feeding confidential information he had learned at Goldman board meetings to Raj Rajaratnam, the Galleon Group hedge fund manager and former billionaire.
Rajaratnam has been a central figure in a multi-year U.S. government crackdown on insider trading. Gupta is a former global managing director of the consulting firm McKinsey & Co, and is the highest corporate executive convicted in the probe.
Jurors found Gupta guilty of leaks during the second half of 2008, including news related to a crucial $5 billion investment in Goldman by Warren Buffett’s Berkshire Hathaway Inc. at the height of the global financial crisis.
Goldman had sought to recover fees it had paid its law firm Sullivan & Cromwell in connection with Gupta’s criminal case and related matters. It cited the federal Mandatory Victims Restitution Act, which requires restitution in some fraud cases.
Gupta opposed restitution but Rakoff, who presided over the criminal trial, said nearly all of what Goldman sought was a “necessary, direct, and foreseeable result of the investigation and prosecution of Gupta’s offense of conviction.”
Rakoff said Goldman could also recover legal costs linked to a related U.S. Securities and Exchange Commission civil case against Gupta, and to the criminal case against Rajaratnam.
He said Gupta’s opposition to the latter “ignores the glaring fact” that he had been convicted of conspiring with Rajaratnam to commit securities fraud.
But the judge said Goldman did not deserve all it sought.
Rakoff said some entries in the “voluminous” 542 pages of billing records he reviewed did not qualify because they involved depositions in civil cases that followed the criminal conviction.
And Rakoff said Goldman on “a few occasions” assigned too many lawyers to the case—”perhaps perfectly appropriate on the assumption that Goldman Sachs wished to spare no expense on a matter of great importance to it,” but more than reasonably necessary under the law.
Goldman spokesman Michael DuVally said: “We are pleased that the court ordered Mr. Gupta to pay restitution.”
Richard Davis, a lawyer for Gupta, said his client plans to appeal.
Rajaratnam is separately appealing his criminal conviction and 11-year prison term, saying FBI wiretap evidence should not have been admitted by U.S. District Judge Richard Holwell at his 2011 trial. Holwell is now in private practice.
The case is U.S. v. Gupta, U.S. District Court, Southern District of New York, No. 11-cr-00907.