Prosecutors Seek to Prove Incentive in Gupta Insider Trading Trial
Financial Integrity, Insider Trading
Rajat Gupta’s attorneys have argued throughout his trial that he and Raj Rajaratnam were at odds over Rupta’s investment in Rajartnam’s fund, the Galleon Group, which collapsed during the financial crisis, resulting in Gupta’s $16.4 million investment in the fund being completely wiped out. According to his attorneys, as a result of this falling out, Gupta had no motivation to provide Rajaratnam with corporate secrets. However, this week prosecutors offered testimony and evidence attempting to prove Gupta’s investment in the Voyager Capital Partners fund did indeed provide Gupta with the financial incentive to leak inside information to Rajaratnam. The Voyager fund was a “fund of funds” that invested in multiple Galleon funds. The government presented evidence indicating that several of those funds were invested in Goldman Sachs. Gupta invested $5 million when the fund was founded in 2005 and then increased his investment to $10 million according to testimony from Isvari Mahadeva, a former Galleon employee. Gupta is charged with providing Rajaratnam with inside information from Goldman and Proctor & Gamble. Before it collapsed during the financial crisis, the Voyager fund performed extremely well, returning approximately 41% during its first few years. A good portion of the testimony was related to a dispute between Gupta and Rajaratnam over the value of Gupta’s investment in the fund. Testimony indicated Rajaratnam eventually relented and Gupta ended up with a higher stake in the fund. The government is expected to wrap up its case this week.
New York Times: Prosecutors Try to Prove Incentive for Insider Tips (6 June 2012)
(Source: New York Times)
EU Regulator Awaits Google Concessions on Charges of Market Abuse
Business Ethics and Corporate Culture, Careful Communication and Proper Use of Computers, Competition
Google has not addressed concerns from EU regulators regarding the company’s alleged abuse of its market dominance. Joaquin Almunia, EU Competition Commissioner, reached out to Google three weeks ago with a chance to settle the EU’s 18-month probe but the company has yet to respond. If Google does not formally offer concessions, it could face formal charges and face a fine that could be as high as ten percent of the company’s global turnover. Almunia believes the investigation indicates Google may have promoted its own search services over those of rivals and that the company’s advertising deals with websites could have blocked its competition and restricted advertisers from moving their campaigns to other search engines. In a statement released shortly after the commissioner’s comments, Google executive chairman Eric Schmidt said, “We disagree that we are in violation, until they are more precise on what area of the law we are in violation of. Give us the precise data, the precise problem.” The EU commission launched the investigation in November 2010 after Google’s rivals accused the company of manipulating search results to promote their own services over others. To date the commission has received 16 complaints.
New York Times: Google Keeps EU Regulator Waiting on Concessions (7 June 2012)
Study Finds Concern about Bribery Risk as Investment Increases
Anti-Bribery and Anti-Corruption, Business Ethics and Corporate Culture
According to a new survey released by Kroll, compliance professionals have seen investing in compliance increase but continue to be concerned about their companies’ exposure to risk. 95% of respondents stated their company’s vulnerability to bribery risk has remained the same or increased over the past few years. 85% believe this risk will continue to increase or remain the same moving forward. More than 50% of respondents indicated their compliance budgets had increased over the past year and nearly half (49%) stated their compliance departments increased their hiring. Kroll found that most compliance professionals believe that third parties pose the biggest overall risk to their companies, noting that 2011 was the first year in which every FCPA enforcement action involved a third party. While 99% of those responding to the survey stated their company’s code of conduct contained anti-bribery provisions for their employees only 73% had the same provisions for third parties. Kroll also found that the pharmaceutical industry had the most exposure to bribery risk but also found the industry was the most prepared to manage the risk. For example, 100% of respondents in the pharmaceutical industry indicated they screen third parties while only 65% of respondents in other industries screened their third parties.
Wall Street Journal: Kroll Study Finds Concern about Bribery Risk as Investment Increases (6 June 2012)
(Source: Wall Street Journal)
Hackers Access LinkedIn and eHarmony Accounts
Information Security, Privacy and Data Protection
Out-Law.com reports that LinkedIn and eHarmony have confirmed that 6.5 million and 1.5 million accounts respectively have been compromised by a data security breach. Reportedly, passwords corresponding to members’ accounts were posted on an online forum by hackers. Both companies have reportedly responded by invalidating the passwords of members whose data had been breached, with LinkedIn also installing “enhanced security” features and eHarmony adopting measures such as data encryption. LinkedIn has reportedly also modified its mobile app in response to concerns that it was “transmitting information users had entered on their mobile calendars without those users’ consent”. Sophos security consultant Graham Cluley reportedly said that while email addresses were not released with the passwords, “it is reasonable to assume that such information may be in the hands of the criminals”, and advised those affected who are using the same passwords on other sites to change them.
Out-Law.com: LinkedIn and eHarmony confirm password data breach (7 June 2012)
Reuters: LinkedIn works with FBI on password theft (8 June 2012)
(Source: Out-Law.com, Reuters)
Do Not Track Default Sparks Criticism
Careful Communication and Proper Use of Computers, Consumer Protection, Privacy and Data Protection
OnlineMediaDaily (OMD) reports that Microsoft is receiving criticism for its decision “to turn on a do-not-track header by default in its newest browser”. Advertising industry representatives have reportedly criticised the software giant for taking a position contrary to self-regulatory groups in the software industry. According to OMD, the “browser-based do-not-track header sends a request to Web sites” which asks them not to track use and send users ads based on their online activity. The banner reportedly doesn’t block cookies or prevent tracking, but rather leaves it “up to ad networks to decide whether to respect the header”. Criticism from the industry has centred around the failure of the approach to allow users a choice as to whether they are or are not tracked by companies, reports OMD.
OnlineMediaDaily: DAA: Ad Industry Might Ignore IE10 Do-Not-Track Requests (1 June 2012)