Former Goldman Sachs director Rajat Gupta will have to reimburse the investment bank for more than $6.2 million in legal fees and expenses it paid related to his insider-trading case, a federal judge ruled Feb. 25.
Gupta, 64, was convicted in 2012 of disclosing information he had access to while serving on Goldman’s board to Galleon Group hedge-fund founder Raj Rajaratnam, his friend and business associate.
The illegal tips included a $5 billion investment by Warren Buffett’s Berkshire Hathaway in Goldman Sachs at the height of the financial crisis. Gupta, currently appealing his conviction, was sentenced to two years in prison in October.
Goldman had asked that Gupta reimburse the bank $6.9 million in legal and related costs paid to the firm of Sullivan & Cromwell LLP.
After reviewing more than 500 pages in billing records, U.S. District Judge Jed S. Rakoff said he found a small number of time entries that he excluded, including billings related to preparing Goldman Sachs employees for potential depositions after Gupta’s conviction, The Wall Street Journal reported.
“The court finds that Goldman Sachs has proved by a preponderance of the evidence that 90 percent of its tendered expenses were both necessary and incurred during its participation in the investigation and prosecution of the offense of conviction,” Rakoff said.
A lawyer for Gupta declined to comment, the Journal added. The fees are not related to the Indian American executive’s criminal defense.
The former Goldman director had a personal net worth of $84.1 million in April 2008, including $11.2 million in cash and an irrevocable trust worth $38.6 million, his banker testified at trial, the Journal said. Gupta’s lawyers argued at one point that he had no financial reason to provide tips to Rajaratnam.
The attorneys also argued that Goldman failed to justify why it was entitled to more than $3 million in legal fees before Rajaratnam’s trial ended in May 2011 and before a criminal probe of Gupta “kicked into high gear.”
The legal fees, Goldman said, involve “fact-finding regarding Gupta’s conduct, representing the firm and its directors, officers and employees in responding to criminal and regulatory enforcement investigations and the resulting prosecutions of Gupta and his tippee, Raj Rajaratnam.”
“We’re pleased the court ordered (Gupta) to pay restitution,” Goldman Sachs spokesman Michael DuVally told the Journal.