Financial Statements and Settlement Negotiations of Cooperating Witnesses in SEC Action Not Discoverable by Defendants


[authors: Emily Stern, Dean N. Razavi]

The U.S. District Court for the Southern District of New York last week denied defendants Rajat Gupta and Raj Rajaratnam’s motion to compel documents concerning settlement negotiations between the Securities and Exchange Commission and various cooperating witnesses. The defendants argued that settlement negotiations were relevant to prove that the cooperators had an incentive to lie. Financial statements provided by the cooperators to the SEC, which demonstrated the cooperators’ ability to pay any fines or penalties imposed by the SEC, would also speak to bias. The court rejected the motion, relying heavily on the SEC’s willingness to produce the settlement agreements themselves. These agreements, rather than the negotiations surrounding them, were sufficient for the defendants to argue that the cooperating witnesses were biased; the cooperators had not made any “Wells” submissions or any other statements that would include fact admissions, and negotiations were more likely to reflect lawyer arguing and “puffery” rather than substantive evidence related to bias. Further, the court held that the financial statements would only be made available to the defendants if they were able to make a threshold showing that the witness lied to the SEC to procure a better deal.

Securities and Exchange Commission v. Gupta, No. 11 Civ. 7566 (JSR) (S.D.N.Y. May 1, 2012).


Written by:

Published In:


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Katten Muchin Rosenman LLP | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.