Former director at Goldman Sachs and Procter & Gamble pleads not guilty
Posted on October 27, 2011 by Securities Information Source

Rajat Gupta, 62

The former director at Goldman Sachs and Procter & Gamble, Rajat K. Gupta, pleaded not guilty in charges of insider trading. The federal grand jury charged Gupta with one count of conspiracy to commit securities fraud and five counts of securities fraud. He is also accused of sharing corporate secrets about the companies with Raj Rajaratnam, who earlier this month was sentenced to 11 years in prison for insider trading.

“Rajat Gupta was entrusted by some of the premier institutions of American business to sit inside their boardrooms, among their executives and directors, and receive their confidential information so that he could give advice and counsel for the benefit of their shareholders,” Preet Bharara, the United States attorney in Manhattan, said in a statement. “As alleged, he broke that trust and instead became the illegal eyes and ears in the boardroom for his friend and business associate, Raj Rajaratnam, who reaped enormous profits from Mr. Gupta’s breach of duty.”

Gupta pleaded not guilty to all charges. According to New York Times, he will be released on a $10 million bond to his home in Westport, Connecticut where he will be required to hand over his passport.

“The facts in this case demonstrate that Mr. Gupta is innocent of any of these charges and that he has always acted with honesty and integrity,” Gary P. Naftalis, a lawyer for Mr. Gupta, said in a statement.

The case is set for trial on April 9, 2012. A Manhattan federal judge, Judge Jed S. Rakoff, is assigned to the case.

According to investment news, the government has charged 56 people with swapping illegal tips in the last two years. 51 of those have either pleaded guilty or been convicted.

See full story from NY Times

The Securities and Exchange Commission today ordered the Financial Industry Regulatory Authority (FINRA) to hire an independent consultant and undertake other remedial measures to improve its policies, procedures, and training for producing documents during SEC inspections.

According to the SEC’s order instituting settled administrative proceedings, certain documents requested by the SEC’s Chicago Regional Office during an inspection were altered just hours before FINRA’s Kansas City District Office provided them.

“The law requires FINRA to produce the documents the SEC seeks in its examinations in complete and accurate form,” said Gerald Hodgkins, Associate Director of the SEC’s Division of Enforcement. “Although FINRA has previously taken steps to improve compliance, those enhancements did not go far enough to prevent the document production failure that occurred in its Kansas City District Office. This order will help ensure that FINRA effectively addresses the weaknesses in its training as well as its policies and procedures.”

The SEC’s order finds that on Aug. 7, 2008, the Director of FINRA’s Kansas City District Office caused the alteration of three records of staff meeting minutes just hours before producing them to the SEC inspection staff, making the documents inaccurate and incomplete.

According to the SEC’s order, the production of the altered documents by the Kansas City District Office was the third instance during an eight-year period in which an employee of FINRA or its predecessor (National Association of Securities Dealers) provided altered or misleading documents to the SEC.

FINRA has consented to engage an independent consultant within 30 days that will:

Conduct a one-time comprehensive review of FINRA’s policies and procedures and training relating to document integrity.
Assess whether the policies and procedures and training are reasonably designed and implemented to ensure the integrity of documents provided to the SEC.
Make recommendations for the enhancement of FINRA’s policies and procedures and training as may be necessary in light of the consultant’s review and assessment.
Without admitting or denying the findings, FINRA consented to the SEC’s order requiring it to cease and desist from committing or causing future violations of Section 17(a) of the Securities Exchange Act of 1934 and Exchange Act Rule 17a-1, and to comply with the undertakings described above. In determining to accept FINRA’s settlement offer, the Commission considered remedial acts promptly undertaken by FINRA and cooperation afforded the SEC staff.

For more information, visit the SEC website

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Each of the top ten will be showcased over the new few weeks. The list contains outstanding attorneys from a variety of international companies across various industries.
“The in-house counsel Law360 selected have stepped up to demand efficiency from outside firms, stayed ahead of the regulatory curve and helped their companies handle legal challenges around the globe in a tough economic climate,” said Magnus Hoglund, co-founder of Law360. “We are pleased to recognize them for their efforts.”

The Most Innovative Corporate Counsel List:

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Law 360

SEC Press Release:

The Securities and Exchange Commission announced that it obtained an emergency court order today to halt a Ponzi scheme that promised investors rich returns on water-filtering natural stone pavers, but bilked them of approximately $26 million over a four-year period.

The SEC’s complaint, filed in U.S. District Court for the Southern District of New York, alleges that convicted felon Eric Aronson and others defrauded investors in PermaPave Companies, a group of firms based on Long Island, N.Y., and controlled by Aronson.

About 140 individuals, many working in the construction or landscaping business, invested in the scheme between 2006 and 2010, the SEC alleged. Investors were told that PermaPave Companies had a tremendous backlog of orders for pavers imported from Australia, which could be sold in the U.S. at a substantial mark-up, yielding monthly returns to investors of 7.8% to 33%. In reality, the complaint states that there was little demand for the product, and the cost of the pavers far exceeded the revenue from sales.

Lacking the profits promised to investors, Aronson and two other PermaPave Companies executives, Vincent Buonauro Jr., and Robert Kondratick, used new investments to make payments to earlier investors and then siphoned off much of the rest for themselves, buying luxury cars, gambling trips to Las Vegas, and jewelry. In addition, the complaint alleges that Aronson used investors’ money to make court-ordered restitution payments to victims of a previous scheme to which he pleaded guilty to conducting in 2000.

“Aronson and his associates operated the PermaPave Companies as a classic Ponzi scheme,” said George S. Canellos, Director of the New York Regional Office. “They created the façade of a profitable business, promised investors extraordinary rates of return, and used much of their investors’ money to fund their own lavish lifestyle.”

The U.S. Attorney’s Office for the Eastern District of New York, which conducted a parallel investigation of the matter, today filed criminal charges against Aronson, Buonauro, and Kondratick, who were arrested earlier today.

According to the SEC’s complaint, when investors began demanding money owed to them, Aronson accused them of committing a felony by lending the PermaPave Companies money at the interest rates he promised them, which he suddenly claimed were usurious. Aronson and his attorney, Fredric Aaron, then allegedly made false statements to persuade investors to convert their securities into ones that deferred payments owed them for several years.

The SEC also alleges that the defendants used some of the money raised through the Ponzi scheme to purchase a publicly traded company, Interlink-US-Network, Ltd. Several months later, the SEC said Interlink issued a Form 8-K, signed by Kondratick, which falsely stated that LED Capital Corp. had agreed to invest $6 million in Interlink. According to the complaint, LED Capital Corp. did not have $6 million and had no dealings, let alone any agreements, with Interlink.

U.S. District Court Judge Jed S. Rakoff granted the SEC’s request to freeze assets of the defendants and eight relief defendants. The SEC is seeking preliminary and permanent injunctions against the defendants, and to have them return their allegedly illicit profits with prejudgment interest, and pay civil monetary penalties. In addition, the SEC seeks to bar Aronson, Kondratick, and Aaron from participating in penny-stock offerings and from serving as officers or directors of public companies.

The SEC’s complaint charges Aronson, Kondratick, Buonauro, the PermaPave Companies, and Interlink with violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and charges Aaron with aiding and abetting the Section 10(b) and Rule 10b-5 violations. The complaint charges Interlink with violations of Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-11 thereunder, and charges Aronson, Kondratick, and Aaron with aiding and abetting these violations. The complaint also asserts violations of Section 5(a) and 5(c) of the Securities Act as to Aronson, Buonauro, and the PermaPave Companies and violations of Section 15(a) of the Exchange Act as to Aronson and Buonauro.

The SEC acknowledges the assistance of the U.S. Attorney’s Office for the Eastern District of New York and the Securities Fraud Squad of Federal Bureau of Investigation in connection with this matter.

Celeste Chase, Daniel Michael, and Desiree M.C. Marmita, conducted the SEC’s investigation; Howard Fischer of the SEC’s New York Regional Office will lead the litigation.

http://www.sec.gov/news/press/2011/2011-201.htm