Rajat Gupta, former Goldman Sachs director, accused of insider trading
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Former Goldman Sachs board member Rajat Gupta is being accused by regulators of passing along inside information about the bank to a prominent hedge fund manager.
Gupta gave up his post on Goldman’s board last May after being alerted that the government was investigating him, but since then there had been no further public signs that the government was pursuing Gupta.
Gupta is accused of passing along non-public information to the former head of the Galleon Group hedge funds, Raj Rajaratnam, who is set to go on trial for insider trading next week. Gupta is described by regulators as an investor in Galleon funds, as well as a ‘a friend and business associate of Rajaratnam.’
Gupta joined a number of corporate boards and started his own investment fund after retiring from a long career at the consulting firm McKinsey & Co.
The Securities and Exchange Commission alleges that Gupta gave information to Rajaratnam about Warren Buffett’s $5-billion investment in Goldman at the height of the financial crisis, allowing Rajaratnam to make a quick one-day, $900,000 profit.
An earlier set of calls between Gupta and Rajaratnam allegedly allowed Galleon to score a $13.6-million profit on Goldman stock.
Regulators also claim that Gupta gave Rajaratnam information about Procter & Gamble Co., where he was on the board.
“Gupta was honored with the highest trust of leading public companies, and he betrayed that trust by disclosing their most sensitive and valuable secrets,” the SEC’s director of enforcement, Robert Khuzami, said in a statement.
[Updated at 10:44 a.m.: Gupta’s lawyer, Gary Naftalis, said the charges were ‘totally baseless.’
‘Mr. Gupta has done nothing wrong and is confident that these unfounded allegations will be rejected by any fair and impartial fact finder,’ Naftalis said.
A spokesman for Goldman said the firm had no comment.
A Procter & Gamble spokesman said Gupta had left the company’s board Tuesday.
‘Mr. Gupta voluntarily resigned from the P&G board today,’ spokesman Paul Fox said. ‘He has vigorously denied the SEC’s accusations that are being leveled at him, but is stepping down in the interest in the company to prevent any distraction to the P&G board and our business.’
Since stepping down from the Goldman board Gupta has remained on the boards of American Airlines, the audio company Harman and Genpact, an outsourcing company.
An American Airlines spokesman said the company had no comment. Requests for comment from Harman and Genpact were not immediately answered.]
-- Nathaniel Popper