Colin Barr

Following the money in banking, economics, and Washington

Gupta lawyer blasts SEC case

March 1, 2011: 2:27 PM ET

The civil insider trading charges lodged against former Goldman Sachs director Rajat Gupta are "baseless."

So says Gary Naftalis, the ace trial lawyer who is representing Gupta.

One of the, um, good guys

Gupta is charged with tipping off his pal Raj Rajaratnam on Goldman's (GS) dealings with Berkshire Hathaway (BRKA) and the firm's 2008 earnings. The tips made Rajaratnam, who is facing criminal insider trading charges, a cool $17 million for just a few days of work, the Securities and Exchange Commission said Tuesday.

But Naftalis didn't get to be one of the 100 top lawyers by being a pushover – he saved Michael Eisner's bacon in the Ovitz case a few eons ago -- and so it's no surprise to hear his take on things differs a bit from the SEC's.

Gupta, Naftalis says, isn't just innocent -- he is a paragon of virtue.

The SEC's allegations are totally baseless. Mr. Gupta's 40-year record of ethical conduct, integrity, and commitment to guarding his clients' confidences is beyond reproach. Mr. Gupta has done nothing wrong and is confident that these unfounded allegations will be rejected by any fair and impartial fact finder. There is no allegation that Mr. Gupta traded in any of these securities or shared in any profits as part of any quid pro quo. In fact, Mr. Gupta had lost his entire $10 million investment in the GB Voyager Fund managed by Rajaratnam at the time of these events, negating any motive to deviate from a lifetime of honesty and integrity.

Two thoughts here:

One, it's hard to hear accused rich guys protest about their integrity without thinking of Steve Rattner. The former private equity titan pledged last November to fight New York pension corruption charges to the bitter end -- before, uh, agreeing a month later to apologize and cough up $10 million.

Two, Gupta's hiding behind his Rajaratnam-related losses echoes Goldman's own initial response to the SEC's Abacus case, brought last April. The idea seems to be that no one would be silly enough to break the law without positioning himself to cash in.

This is a useful concept because it allows you to put your totally unrelated investing stupidity to work in your defense.

But poor investment performance won't help Naftalis explain away all those phone calls between his client and Rajaratnam that just happened to fall between Goldman board meetings and Galleon's well-timed purchases and sales of Goldman securities. So we shall see how compelling the SEC judge hearing the case finds talk of Gupta's integrity.

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About This Author
Colin Barr
Colin Barr
Senior Writer, Fortune

Colin Barr has covered finance for Fortune.com since November 2007. Previously he was a writer and editor for TheStreet.com, winning a 2006 Society of American Business Editors and Writers award for "The Five Dumbest Things on Wall Street," and for Dow Jones Newswires. He is a 1991 graduate of Penn State and lives in Port Washington, N.Y., with his wife Meena Bose and their two kids.

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