Suit no longer relevant, rules court.
By Deepak Chitnis
WASHINGTON, DC: Former Managing Director of McKinsey Rajat Gupta’s lawsuit against former friend and business partner Parag Saxena was thrown out by a federal judge on Tuesday because the complaints listed in Gupta’s suit are no longer relevant, reported The New York Times today.
Gupta filed the lawsuit against Saxena in March of this year, alleging that Saxena was trying to keep him from having any influence in New Silk Route, a private equity firm they co-founded in 2006. When Gupta was arrested in 2011 under suspicion of engaging in insider trading with Sri Lankan American billionaire Raj Rajaratnam, Saxena asked him to step away from the company so that New Silk Route’s image wouldn’t be tainted by the scandal.
Gupta agreed to do so in February of 2012, but only on the condition that he be allowed to choose a board member that would represent his interests at the company. According to the lawsuit, Saxena blocked Gupta’s attempts to appoint a board member of his choosing so that Saxena himself could maintain complete control.
By the time the lawsuit was filed this past March, the friendship had completely dissolved, and the two men were embroiled in a bitter fight over the fate of their joint venture.
However, in the time between when the suit was filed and the suit’s dismissal on Tuesday, Gupta has been able to appoint a board member, meaning that the suit’s initial claims are essentially moot. Manhattan Federal District Court Judge George B. Daniels said as much, calling the case’s legal merits “dim.”
But Gupta and his lawyer, Rishi Bhandari, are not discouraged by the court’s decision. Bhandari told the court that the lawsuit is what facilitated Gupta getting his board member appointed, insinuating that the threat of legal action scared Saxena into holding up his end of their deal. Bhandari also said that if Gupta’s board member’s position was threatened in any way, the lawsuit would be re-filed, which Judge Daniels said he would allow.
Gupta was found guilty on three counts of securities fraud and another count of conspiracy in July of last year, and was sentenced in October 2012 to two years behind bars. He is currently in the process of appealing the verdict, as well as the ruling that he should pay a $13.9 million fine and cannot serve as the director of a publicly traded company for the rest of his life. He is currently out on $10 million bail.
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