Rajat Gupta in custody as insider-trading case takes dramatic turn

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One of the most revered figures in U.S. finance, Rajat Gupta, surrendered to the FBI on Wednesday morning to face charges in a wide-ranging government investigation of insider trading on Wall Street.

Gupta, the former head of the consulting firm McKinsey & Co., was first fingered in the probe earlier this year when the Securities and Exchange Commission accused him in regulatory proceedings of improperly sharing information he learned as a member of Goldman Sachs’ board of directors.

Gupta was accused at the time of sharing information with hedge fund magnate Raj Rajaratnam about Warren Buffett’s $5-billion investment in Goldman at the height of the financial crisis. The revelations came just days before Rajaratnam’s trial on insider-trading charges began. Rajaratnam was convicted, partially based on his interactions with Gupta, and recently received the longest sentence ever for insider trading violations.

Since Gupta was accused, though, his case had mostly gone quiet, and there was some speculation that it was being dropped. Gupta sued the SEC this summer, accusing the agency of treating him unfairly by pursuing him through administrative proceedings rather than the more typical lawsuit or criminal charges.

In a dramatic turn in the case, Gupta surrendered to the FBI to face criminal charges at 5:15 a.m. Wednesday morning at the agency’s Manhattan headquarters. An FBI spokesman said Gupta has been processed and will be formally charged later today by the U.S. attorney’s office. The criminal indictment charging him is still under seal.

Gupta’s lawyer, Gary Naftalis, could not immediately be reached for comment. When the SEC initially accused Gupta, Naftalis said ‘Mr. Gupta has done nothing wrong and is confident that these unfounded allegations will be rejected by any fair and impartial fact-finder.’

Gupta’s arrest marks a low point in the downward arc of a man who was once one of the most trusted figures in the corporate world, conferring with the kings of American finance. Within days of the civil case being made public in March, Gupta resigned from his positions on several corporate boards, including those of Procter & Gamble and American Airlines’ parent company.

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-- Nathaniel Popper