Rajat Gupta Charged – Rajat K. Gupta, a former Goldman Sachs director who surrendered to the Federal Bureau of Investigation on Wednesday morning, was charged with insider trading, the latest development in the government’s multiyear crackdown on illegal activity on Wall Street.
He is accused of leaking corporate secrets to the hedge fund manager Raj Rajaratnam, the Galleon Group co-founder who was sentenced to 11 years in prison this month for making tens of millions of dollars through insider trading. A federal grand jury in Manhattan charged him with one count of conspiracy to commit securities fraud and five counts of securities fraud, all related to tips on Goldman Sachs in 2008.
“Gupta was entrusted by some of the premier institutions of American business to sit inside their boardrooms, among their executives and directors, and receive their confidential information so that he could give advice and counsel for the benefit of their shareholders,” Preet Bharara, the United States attorney in Manhattan, said in a statement. “As alleged, he broke that trust and instead became the illegal eyes and ears in the boardroom for his friend and business associate, Raj Rajaratnam, who reaped enormous profits from Mr. Gupta’s breach of duty.”
In its complaint, authorities claimed that Gupta gave Rajaratnam advance word of Warren E. Buffett’s $5 billion investment in Goldman during the darkest days of the financial crisis. After hanging up from a special board meeting in September 2008, prosecutors say that he called Rajaratnam within 16 seconds. Moments later, with just minutes before the stock market closed, Rajaratnam purchased shares in Goldman.
When the hedge fund manager later sold the position, he netted about $840,000, according to the criminal complaint.
The complaint details ties between Gupta and Rajaratnam that pre date the alleged Goldman tips. From 2003 to 2005, Rajat had money in at least two of Mr. Rajaratnam’s hedge funds, an investment valued at about $2.5 million by March of 2005, according to the complaint. In charging him, the government is tying up one of the biggest loose ends resulting from the investigation into the Galleon Group, which began nearly five years ago at the Securities and Exchange Commission.
The charges are a stunning reversal of fortunes for Gupta. A native of India, he graduated from Harvard Business School and had a global profile as an adviser to some of the nation’s most iconic companies. He served as a director at Goldman, Procter and Gamble and the parent company of American Airlines.
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