Gupta ordered to pay Goldman Sachs for legal fees

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In just about all enforcement cases against big financial services employees, the firm pays the legal bills for the defense of the employee.

This can often to lead to odd situations, as employees are pitted against their former employers who are forced by contract to foot the legal costs for their adversary. That often leads to some snickering, and seems to provide an incentive for the accused ex-employee to drag out the case, given that he or she is not paying the legal bills.

But banks have recourse, depending on the outcome of the case. Consider Rajat Gupta, the influential Goldman Sachs director who was found guilty of insider trading at a trial that centered on whether he leaked confidential information about the bank to a hedge fund.

Goldman Sachs dutifully paid Gupta's legal bills, which ran to more than $6 million, most of which went to Sullivan & Cromwell. But after the guilty verdict, the bank sued Gupta, asking for him to repay the money, and this week it prevailed in court, where a judge ruled that Gupta had to pay Goldman back $6.2 million, according to news reports. Goldman Sachs was deemed a victim of a rogue employee, allowing it to seek restitution basically.

Goldman Sachs had been seeking to clawback some of the salary it paid to Gupta as a director, but it recently withdrew that case.

One issue here is what happens if Gupta is cleared at the appellate level. He seems to be making decent progress, as evidenced by the fact that a judge has allowed him to remain free on bail as the case winds through the system. If he is cleared, he has a strong case to not pay back the $6.2 billion and continue to have Goldman Sachs pay future legal bills.

Another Goldman Sachs ex-employee, Fabrice Tourre, is in a similar position, as he prepares for his trial. 

For more:
- here's a Daily News article

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