(Bloomberg News) Rajat Gupta, the former Goldman Sachs Group Inc. director, can proceed with a suit claiming the U.S. Securities and Exchange Commission violated his rights when it filed an administrative action accusing him of passing illegal stock tips.

The SEC initiated the administrative proceeding in Washington on March 1, claiming Gupta passed information to Galleon Group LLC co-founder Raj Rajaratnam about Goldman Sachs and Procter & Gamble Co., where Gupta was also on the board.

U.S. District Judge Jed Rakoff ruled today that Gupta, who hasn't been charged criminally, may argue that the agency intentionally singled him out for unfair treatment in retaliation for claiming his innocence. Rakoff said that all of the other suits filed in the Galleon case, against 21 people and seven companies, are in federal court.

"We have the unusual case where there is already a well- developed public record of Gupta being treated substantially disparately from 28 essentially identical defendants, with not even a hint from the SEC, even in their instant papers, as to why this should be so," Rakoff wrote in an opinion today.

SEC spokesman John Nestor said the agency may appeal the ruling.

Rajaratnam Verdict

Rajaratnam was found guilty of 14 criminal counts of conspiracy and securities fraud on May 11. He is awaiting sentencing.

In the administrative proceeding the SEC claimed Gupta gave Rajaratnam information about Berkshire Hathaway Inc.'s $5 billion investment in Goldman Sachs. The agency also alleges Gupta told Rajaratnam about quarterly earnings of Goldman Sachs and Procter & Gamble. Gupta hasn't been criminally charged.

In his suit against the SEC, Gupta claims the agency is unfairly trying to gain an advantage by denying him legal protections he would have had if the suit had been filed in federal court.

"The only plausible inference is that the Commission is proceeding how and where it is against Mr. Gupta for the bad faith purpose of shoring up a meritless case by disarming its adversary," Gupta claimed in his complaint.