US regulator SEC has asked an appeals court to affirm a district court's decision that India-born former Goldman Sachs director Rajat Gupta pay a $ 13.9 million penalty and be banned for life from serving as director of a public corporation.
The federal regulator has filed a brief in the US Court of Appeals for the Second Circuit, saying the district court acted well within its discretion by permanently barring Gupta from associating with brokers, dealers, and investment advisors, permanently enjoining him from future violations of the securities laws and permanently barring him from serving as an officer or director of a public company.
65-year-old Gupta has been granted time till April 7 to file his reply to the SEC brief.
Mr Gupta had last year in November asked the appeals court to overturn the district court's decision that ordered him to pay the $13.9 million (nearly Rs. 85 crore) penalty in the civil insider trading case filed against him by the SEC.
His lawyers had argued that the district court "abused" its discretion in imposing the statutory maximum civil penalty of $13.9 million (nearly Rs. 85 crore), which is three times the $4.6 million (nearly Rs. 28 crore) in gains made by hedge-fund manager Raj Rajaratnam who traded on tips Gupta allegedly passed on to him.
The lawyers said the penalty was excessive in light of Gupta already facing a $5 million (nearly Rs. 30 crore) fine and two-year prison sentence in the criminal insider trading case.
The SEC said the district court was right in ordering that Gupta pay the maximum statutory civil penalty.
"Contrary to Gupta's contentions, the district court did consider whether to reduce the civil penalty in light of penalties imposed in the prior criminal case, but exercised its discretion to decline such a reduction."
The SEC said imposing the maximum civil penalty is justified as it will ensure a "meaningful deterrent" effect given Gupta's wealth, and the aggravating facts that his tipping arose from his role in the securities industry and resulted in substantial investor losses."
Mr Gupta has been convicted in a parallel criminal insider trading case brought against him by India-born federal prosecutor Preet Bharara. He was sentenced to two years in prison but has appealed against his conviction and is awaiting the decision of the appeals court while on bail.
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