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Wednesday
Oct262011

Former Goldman Exec. Surrenders to FBI, Faces Insider Trading Charges

Umesh Goswami/The India Today Group/Getty Images(NEW YORK) -- The federal government's biggest insider trading case has ensnared its most prominent executive yet. Rajat Gupta, formerly a board member at Goldman Sachs and Proctor & Gamble, surrendered to the FBI on Wednesday to face criminal charges.

The 62-year-old executive, who visited the White House in 2009 for the state dinner honoring India, faces one count of conspiracy to commit securities fraud and five counts of securities fraud, according to the indictment filed Wednesday in the Southern District of New York.

Gupta, who has an MBA from Harvard Business School and lives in Westport, Conn., has previously been accused of tipping convicted hedge fund manager Raj Rajaratnam with inside information about the quarterly earnings of both firms. Additionally, when Warren Buffett readied his $5 billion investment in Goldman Sachs in 2008 the SEC said Gupta called Rajaratnam before it was publicly announced.

"The conduct alleged is not an inadvertent slip of the tongue by Mr. Gupta," FBI Assistant Director-in-Charge Janice Fedarcyk said in a statement. "His eagerness to pass along inside information to Rajaratnam is nowhere more starkly evident than in the two instances where a total of 39 seconds elapsed between his learning of crucial Goldman Sachs information and lavishing it on his good friend. That information (captured by the FBI) was conveyed by phone so quickly it could be termed instant messaging."

Gupta's lawyer, Gary Naftalis of the firm Kramer Levin, called the government's criminal case "flawed" and based on "unreliable evidence being used in an attempt to bring down a man of sterling reputation."

"The facts demonstrate that Mr. Gupta is an innocent man and that he has always acted with honesty and integrity," Naftalis said in a statement Wednesday.

"Rajat 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," Manhattan U.S. Attorney Preet Bharara 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."

Gupta played a starring role in Rajaratnam's trial that ended with the longest-ever sentence handed down for insider trading. Jurors saw transcripts of phone calls between the two men and heard Gupta's voice on wiretaps.

"Given the prominent role that Mr. Gupta played in the recent trial of Raj Rajaratnam, many people believed that these charges were all but inevitable," said Robert Mintz, a former federal prosecutor now in private practice at McCarter & English in New Jersey. "It has been clear for some time now that federal prosecutors had Mr. Gupta in their crosshairs and that the real question was when, not if, they would pursue insider trading charges against him."

Copyright 2011 ABC News Radio

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