Entries in Goldman Sachs (25)


Goldman Sachs Can Party Again

Photographer: Andrew Harrer/Bloomberg via Getty Images(NEW YORK) -- Is the recession over? Looking at the Instagram photos of one New York socialite, you might think so.

Photos of a lavish Goldman Sachs partners dinner last month showed bankers are partying again.

The last big dinner was held in 2006. Soon after, the economy began tanking and Goldman Sachs, along with other big investment banks on Wall Street, became Main Street targets for profiting from the subprime mortgage crisis.

Goldman Sachs was criticized for taking government bailout money and, in turn, awarding their executives with large bonuses. They have since paid back the money and posted profits, but also cut thousands of jobs.

One source well-connected with the big banks and familiar with the parties told ABC News that a party doesn’t necessarily indicate a huge economic change, but it does mean things are certainly looking up.

“I think everybody now will do parties, but nothing like the old days,” the source said. “Many have cancelled Christmas parties for the last five years and the parties, if they have them at all, are half of what they used to be.”

The source added that in 2008 it wouldn’t have been good to be seen partying during such a dire economic state.

Though Goldman Sachs spokesperson David Wells wouldn’t go into the details of the dinner, he said the partners gather intermittently and for many reasons. Another partner meeting was held in 2011.

“The dinner was a nice way to end a week full of meetings and to welcome the 70 new partners, especially since that whole group from around the world doesn’t get together often,” Wells told ABC News.

The photos were posted on the Instagram account of @shannonkelly926, who has since made her profile private. Kelly’s Twitter account says she recently relocated to New York from Las Vegas, where her MySpace page shows pictures of her competing in swimsuit competitions within the Las Vegas night club circuit. A request for comment was not returned by Kelly.

The photos of the Goldman Sachs party were obtained and first reported by New York Magazine, and show a large black tie affair with formal table settings and a musical performance.

The Instagram postings were tagged to warehouse party venue Pier 36, and appeared to be the only photos that have surfaced from the event. A sweep of the 70 new Goldman Sachs partners’ social media sites did not reveal any images from that night.

Copyright 2013 ABC News Radio


DOJ Will Not Prosecute Goldman Sachs in Financial Crisis Probe

Andrew Harrer/Bloomberg via Getty Images(WASHINGTON) -- The Justice Department has decided it will not prosecute Goldman Sachs or its employees for their role in the financial crisis, following an investigation by senators Carl Levin, D-Mich., and Tom Coburn, R-Okla. The congressional investigation found problems with the credit rating agencies and poor oversight from regulators, and highlighted abuses by Goldman Sachs and other large investment banks. Senator Levin sent a formal referral to the Justice Department for a criminal investigation in April 2011.

The investigative report by the Senate’s Permanent Subcommittee on Investigations, chaired by Levin, found that Goldman Sachs, "used net short positions to benefit from the downturn in the mortgage market, and designed, marketed, and sold CDOs in ways that created conflicts of interest with the firm’s clients and at times led to the bank's profiting from the same products that caused substantial losses for its clients."

A statement from the Department of Justice (DOJ) issued late Thursday evening noted, "Based on the law and evidence as they exist at this time, there is not a viable basis to bring a criminal prosecution with respect to Goldman Sachs or its employees in regard to the allegations set forth in the report."

"The department and its investigative partners conducted an exhaustive review of the report and its exhibits, independently gathered and scrutinized a large volume of other documents, and tenaciously pursued potential evidentiary leads, including conducting numerous witness interviews," the Justice Department’s statement continued. "While the department and investigative agencies ultimately concluded that the burden of proof to bring a criminal case could not be met based on the law and facts as they exist at this time, we commend the hard work of those involved in preparing the report and thank the Senate’s Permanent Subcommittee on Investigations for its cooperation in regard to the criminal investigation."

"We are pleased that this matter is behind us," Goldman Sachs spokesman David Wells said when contacted by ABC News.

The Justice Department statement noted that if additional information emerges, the cases could be prosecuted in the future.

This most recent decision follows other high-profile investigations that DOJ decided not to prosecute: There was the collapse of AIG and the role of the top executive at AIG Financial Products division, Joseph Cassano, and former Countrywide CEO Anthony Mozillo, who was fined by the Securities and Exchange Commission (SEC) in an insider trading case. Citibank and JP Morgan both had multi-million-dollar settlements with the SEC over collateralized debt obligations, or CDOs, tied to the U.S. housing market, but DOJ has not brought any criminal cases. Freddie Mac was subpoenaed in a grand jury investigation in 2008 but the firm disclosed in an Aug. 8, 2011, SEC filing that the Justice investigation was closed.

Attorney General Eric Holder defended the Justice Department’s record in pursuing high profile financial fraud cases. "There have been, I guess, 2,100 or so mortgage-related matters that we have brought here at United States Department of Justice. Our state counterparts have done a variety of things. The notion that there has been inactivity over the course of the last three years is belied by a troublesome little thing called facts," he said.

Goldman has faced stiff penalties from the SEC. In April 2010 the agency filed a civil charge against Goldman Sachs and Fabrice Tourre, a vice president, for making misstatements and omissions from financial records in connection with CDOs that Goldman Sachs marketed to their investors. CDOs played a significant part in the financial crisis in 2008.

ABACUS 2007-AC1 was tied to the performance of subprime residential mortgage-backed securities and was composed of  investment choices hedge fund manager John Paulson had a financial interest in selecting, although Tourre never disclosed to potential investors that Paulson & Co. had a short-interest position in seeing ABACUS go down. Investors in ABACUS allegedly lost an estimated $1 billion.

Goldman Sachs reached a settlement with the SEC in July 2010, paying a $550 million fine for admitting that they should have included information about Paulson’s investment position. Tourre is currently in ongoing litigation with the SEC over the case.

Copyright 2012 ABC News Radio


Five of America's Biggest Banks Downgraded

Scott Eells/Bloomberg via Getty Images(NEW YORK) -- Moody’s Investors Service announced Thursday that it had downgraded the credit ratings of 15 banks, including five of America's biggest financial institutions: Goldman Sachs, Bank of America, Citigroup, JPMorgan and Morgan Stanley.

As The New York Times explains, a downgrade like this could have “serious implications for a bank’s bottom line, potentially increasing the cost of borrowing and eroding the confidence of customers and lenders. Trading partners may opt to move their business elsewhere."

Moody's lowered credit ratings were due to less confidence in the banks' long-term profit and growth prospects because of so many international debt problems.

While the action does make it more difficult for banks to fund investment activites because of a hike in short-term borrowing costs, Moody's action is not expected to have much of an impact on Wall Street Friday.

For the most part, the banks were anticipating the downgrade from Moody's and have been putting away cash on the side to deal with it.

Ultimately, however, consumers can expect a more difficult time getting loans for small businesses, cars and mortgages -- a development that will further slow down economic growth.

Copyright 2012 ABC News Radio


Goldman Sachs Executive Quits, Rips Firm

Andrew Harrer/Bloomberg via Getty Images(NEW YORK) -- Greg Smith, Goldman Sachs’ head of equity derivatives business in Europe, the Middle East and Africa wrote a scathing op-ed in the New York Times on Wednesday as part of his resignation, saying the firm has lost its way and is ripping off its clients.

Smith, who worked at the investment bank for nearly 12 years, detailed why he was resigning, calling the company’s environment “as toxic and destructive as I have ever seen it,” and said that over the last 12 months, he has seen five different managing directors “refer to their own clients as ‘Muppets,’ sometimes over internal e-mail.”

The op-ed echoed previous accusations in 2010 that Goldman Sachs traded against clients by profiting off securitized subprime home mortgages while betting against the housing market. Last month, the Securities and Exchange Commission said it was investigating a 2006 subprime mortgage bond deal.

In response, Goldman Sachs’ CEO Lloyd Blankfein and chief operating officer Gary Cohn sent an internal memo to employees, saying “we were disappointed to read the assertions made by this individual that do not reflect our values, our culture and how the vast majority of people at Goldman Sachs think about the firm and the work it does on behalf of our clients.”

Smith cited pressure to “execute on the firm’s ‘axes’” — persuading clients to buy what the firm is trying to “get rid of because they are not seen as having a lot of potential profit.”  The other key is to “hunt elephants” or induce clients “to trade whatever will bring the biggest profit to Goldman.”

Smith wrote, “To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.”

Goldman Sachs spokesperson David Wells declined to comment on whether the company planned to fill Smith’s position and provided the following statement: “We disagree with the views expressed, which we don’t think reflect the way we run our business.  In our view, we will only be successful if our clients are successful.  This fundamental truth lies at the heart of how we conduct ourselves.”

Smith said he managed the sales and trading summer intern program in 2006, but he “knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.”

Previously, he said he had “pride” in the company but he wrote “I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years.”

“Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence,” he wrote.

Copyright 2012 ABC News Radio


Goldman Sachs CEO, Executives to Get Smaller Bonuses This Year

Jin Lee/Bloomberg via Getty Images(NEW YORK) -- Goldman Sachs CEO Lloyd Blankfein's bonus will be cut to $7 million this year from $12.6 million the year before, according to Equilar, an executive compensation data firm.  Goldman's heaviest hitters, as a group, will see their bonuses reduced by almost half.  They are but the most recent group of traders to feel the bite of Wall Street pay cuts.

Consulting firm Options Group had predicted as much in a November report, saying it expected to see compensation at the biggest Wall Street banks sink by 27 percent to 30 percent to the lowest levels seen since the 2008 financial crisis.

"Obviously this is not a good year for Wall Street compensation and an awful lot of the pressure is going to fall on managing directors," said Brad Hintz, research analyst with Sanford C. Bernstein & Co.  Bankers in the fixed income market and in credit trading, he said, would be hit hardest.

Goldman's earnings fell 58 percent in the last quarter of 2011.  Revenue was lower than expected.  Blankenfein in a January statement said the bank's results were the result of "global macro-economic concerns which significantly affected our clients' risk tolerance and willingness to transact."

In January, investment bankers at Bank of America were told to expect compensation cuts of up to 25 percent, according to Bloomberg.

Bank of America reported earnings of $2 billion in the last three months of 2011, up from a net loss of $1.2 billion in the same period a year ago, boosted in part from a one-time gain on the sale of China Construction Bank. During a conference call last week, Bank of America's CEO Brian Moynihan revealed the failed plan to impose a $5 debit card monthly fee contributed to a 20 percent increase in closed accounts in the last three months of 2011.

The top executives at JPMorgan Chase, Citigroup, and Morgan Stanley also received stock award pay cuts of 15 to 25 percent after the banking giants' shares took a beating in 2011. But like the heads of the United Auto Workers union after GM and Chrysler took bailouts, banking execs' pay packages are still eye-popping considering their companies were bailed out few years ago.

Copyright 2012 ABC News Radio


Goldman Sachs CEO Lloyd Blankfein in Same-Sex Marriage Ad

Andrew Harrer/Bloomberg via Getty Images(NEW YORK) -- Goldman Sachs’ Lloyd Blankfein has become the first major CEO to lend his support to the Americans for Marriage Equality campaign promoting same-sex marriage.

In a 30-second video, Blankfein says, “America’s corporations learned long ago that equality is just good business and is the right thing to do.”

The Human Rights Campaign released the video on Monday via its website and YouTube.

Blankfein’s ad is the twelfth video for the campaign, which has included notable figures including New York Giants’ owner Steve Tisch, actor John Leguizamo and NFL Cleveland Browns’ linebacker Scott Fujita.

Investment bank Goldman Sachs, based in New York City, has a non-discrimination policy in place that includes sexual orientation.

The Human Rights Campaign launched Americans for Marriage Equality in October 2011 with Mayor Cory Booker of Newark, N.J.

Copyright 2012 ABC News Radio


Goldman Sachs Reports Lower Earnings

Andrew Harrer/Bloomberg via Getty Images(NEW YORK) -- Goldman Sachs said its earnings fell 58 percent in the last three months of 2011, although they beat Wall Street's estimates. Its revenue, however, was lower than expected because of volatility in the financial markets.

Last year, "was dominated by global macro-economic concerns which significantly affected our clients' risk tolerance and willingness to transact," Lloyd Blankfein, CEO of the investment bank, said in a statement Wednesday.

Goldman Sachs made $1 billion, or $1.84 per share, from October through December, beating the financial research firm FactSet's estimate of $1.28 per share from surveyed analysts. But its quarterly earnings per share were well below the $3.79 from that of 2010.

For the entire year, its investment banking revenue was $4.36 billion, a decrease of 9 percent from 2010. Compared with a year ago, the company's quarterly revenue from investment banking fell 43 percent in the fourth quarter to $857 million.

For the third quarter, Goldman Sachs reported its second quarterly loss as a public company because of market volatility.

Compensation and benefits expenses, including salaries, discretionary compensation, amortization of equity awards and other items such as benefits, were $12.22 billion for 2011, a decrease of 21 percent compared to $15.38 billion in 2010. Goldman Sachs' total staff shrunk 7 percent compared with the end of 2010, the company reported in its earnings announcement.

Because of the slowdown in overall investment banking activity, annual bonus and compensation for the industry might be the lowest in three years, analysts forecast.

Wells Fargo & Co. Tuesday reported a quarterly profit increase of 20 percent, in stark contrast to an 11 percent decline at Citigroup. Wells Fargo's net income rose to $4.11 billion, or 73 cents per share, while revenue decreased 4 percent to $20.6 billion.

Citi had a profit of $1.16 billion, or 38 cents per share, on revenue of $17.2 billion, less than expected. Citigroup had a profit of $1.3 billion and revenue of $18.4 billion for the same quarter last year. The bank's full-year net income for 2011 was $11.3 billion, up 6 percent from $10.6 billion in 2010.

JPMorgan Chase, the largest bank by assets, said Friday that fourth-quarter profit fell 23 percent but was in line with analyst expectations. The bank's profit fell to $3.73 billion, or 90 cents a share, from $4.83 billion, or $1.12, a year earlier. Investment banking revenue declined by 30 percent as trading slowed because of the financial crisis in Europe.

Copyright 2012 ABC News Radio


ABC News Lists Top 10 Business Blunders of 2011

Jin Lee/Bloomberg via Getty Images(NEW YORK) -- Businesses make mistakes all the time. Unfortunately, when they blunder, the repercussions can be wide, from customer data being compromised to employees losing their jobs and shareholders getting wiped out.

Here's a look at 10 foul-ups of 2011:

1. Bank of America: The $5 Fiasco

When Bank of America announced plans in late September to charge customers for using their debit card for purchases, customers expressed their outrage in dramatic fashion.

Over 150,000 people signed a petition asking the bank to cancel the $5 monthly fee and over 650,000 people joined Bank Transfer Day, shifting funds to credit unions.

The bank, still reeling from the mortgage meltdown, relented and announced on Nov. 1 the fee's cancellation.

2. Netflix: Red Envelope Company Sees Red

DVD-rental company Netflix lost 800,000 of its 20 million members after it announced a new pricing plan and streaming service, Qwikster, in October. CEO Reed Hastings soon after canceled plans to split the service and apologized to customers, but the damage was done. Netflix's stock price, which was near $300 a share in mid-July and has a 52-week high of $304.79, recently traded at $70.

3. Family Radio: Doomsday Averted, But Not for Radio Station

Companies frequently miss forecasts but when Harold Camping, president of radio station Family Radio, predicted the end of the world twice this year, some may have breathed a sigh of relief.

Camping first predicted the end of the world for May 21, 2011 investing heavily with millions of dollars in a national advertising campaign. After the world pressed on, Camping then changed his forecast to Oct. 21. Camping reportedly apologized for his failed predictions.

"I should not have said that, and I apologize," Camping said, according to San Francisco's KGO-TV. "God is merciful."

4. RIM's Blackberry: Worldwide Outage

Outages for Canadian company Research in Motion's (RIM) Blackberry mobile device caused a stir after service in North America, Europe, the Middle East, Africa and parts of Asia was knocked out Oct. 12.

David Yach, chief technology officer for software, said the problem originated in Europe and spread because there was a massive backlog of emails. CEO Mike Lazaridis apologized in a Youtube video.

The company's shares fell more than 75 percent in 2011, with growing domination from smartphones with Google's Android software and the iPhone. The Wall Street Journal called 2011 a "disastrous" year for RIM and investors and analysts have called for the board to take stronger control of the company.

5. Goldman Sachs: Occupy Losses

In October, venerated investment bank Goldman Sachs reported its second loss since its IPO in May 1999, missing estimates for the second consecutive quarter. The company reported a loss of $393 million in the third quarter compared with a $1.9 billion profit one year ago. Worries in both debt and equity markets caused softness in the bank's revenue, according to Janney Capital Markets.

Goldman Sachs and other large banks attracted the ire of the Occupy Wall Street movement, which launched on Sept. 17, for their role in risky bets in the subprime mortgage market that contributed to the country's near financial collapse.

6. Sony PlayStation: The Year of the Hack?

In April, Sony Corp. said the credit card data of PlayStation users may have been stolen in a hack that forced it to shut down its PlayStation Network for a week, disconnecting around 77 million user accounts around the world.

The company said there was no evidence that credit card information was compromised, but said it could not rule out that possibility, leading PlayStation users -- and their parents -- to take precautions with their data.

Several other companies confessed to data breaches, such as investment bank Morgan Stanley and online marketing firm Epsilon.

7. Borders: Bankruptcy, Liquidation

After bookseller Borders filed for chapter 11 bankruptcy in February, the chain began liquidating bookstores and closed over 500 bookstores in the U.S. and Puerto Rico that it owned at the beginning of the year. Borders Group, based in Ann Arbor, Mich., announced 6,000 layoffs February 17 and 10,700 layoffs July 19.

8. American Airlines: Friendly Skies of Bankruptcy

American Airlines' parent company, AMR, filed for Chapter 11 bankruptcy on Nov. 29, faced with rising fuel prices and high labor costs. While operations continued for customers, the airline said its employees would be the most affected.

The company, based in Fort Worth, Texas, was the only major U.S. airline that did not seek bankruptcy protection after the 2001 terrorist attacks. Unlike other carriers, American did not merge with a competitor, and it was the only major airline to lose money last year.

CEO Gerard Arpey stepped down and was replaced by Thomas Horton, formerly the company's president, to run the nation's third-largest airline. AMR shares plunged 85 percent to just 25 cents a share in trading that day. Thursday the New York Stock Exchange announced that the company's shares would be delisted.

9. U.S. Postal Service: Shuttering Post Offices

The U.S. Postal Service had a dramatic last few years as post offices have closed in rural towns, and in 2011 the organization was near a default and faced a $9 billion deficit.

With the prevalence of e-mail and delivery competitors FedEx and UPS, the future of the postal service is very much in doubt.

On Sep. 15, the Postal Service announced it would begin studying 252 out of 487 mail processing facilities for possible closure but it has not yet confirmed closures of those facilities.

The Postal Service announced on Dec. 5 that it wants to cut an estimated $3 billion in costs to avoid a bankruptcy. The proposal includes the elimination of one-day delivery and closing half of its processing centers.

10. MF Global

The bankruptcy of the commodities trading firm MF Global on Oct. 31 was the eighth largest in U.S. history. About $1.2 billion in client money went missing as the company shut its doors. Jon Corzine, former senator and governor of New Jersey who resigned as CEO on Nov. 3, said he does not know where the money is.

After making risky bets on the European debt crisis, the company's bankruptcy has "devastated thousands of customers -- including farmers, ranchers, grain elevators, small business owners and others," said Sen. Debbie Stabenow, D-Mich. A Senate hearing about the missing money took place on Dec. 13, describing outrage from lawmakers and clients.

Copyright 2011 ABC News Radio


Inside the Rajat Gupta Insider Trading Charges

Spencer Platt/Getty Images(NEW YORK) -- Wall Street power player Rajat Gupta arrived at the White House State Dinner in 2009 at the pinnacle of American business: on the board of directors at Goldman Sachs and Proctor & Gamble, and widely respected in the financial community.

But Wednesday, federal investigators accused Gupta of being a symbol of Wall Street greed -- an inside trader.

Authorities say he used his sensitive positions to provide billionaire hedge fund manager Raj Rajaratnam with tips that allowed him to pocket $23 million playing the stock market.

While small investors saw their portfolios crater in 2008-2009, Rajaratnam, the founder of Galleon Management, profited no matter what happened on Wall Street.

The government released wiretaps of telephone conversations between the two men to show how they operated. This conversation took place in July 2008, just after Gupta attended a Goldman Sachs board meeting. The Galleon fund manager quizzed him about what acquisitions Goldman Sachs might be interested in.

RAJARATNAM: There’s a rumor that Goldman might look to buy a commercial bank....Have you heard anything along that line?

GUPTA: Yeah. This was a big discussion at the board meeting...on whether we...

RAJARATNAM: Buy a commercial bank?

GUPTA: Buy a commercial bank.

No stock transactions came from that particular call, but many other calls between the two did result in insider trading, according the indictment. In fact, that wiretapped conversation was part of the evidence last spring when Rajaratnam was convicted in the biggest insider trading case ever brought by the U.S. government.

This discussion was also entered into evidence to establish Rajaratnam was pumping Gupta for critical investment information.

RAJARATNAM: All right, anything else? Anything interesting?...Keep your eyes and ears open if you hear anything.

The government claims something “interesting” did come up as 2008′s financial meltdown became evident. At a 3:15 p.m. board meeting on Sept. 22, 2008, Gupta learned that Warren Buffet and Berkshire-Hathaway were going to invest $5 billion dollars in Goldman Sachs.

Gupta allegedly called Rajaratnam at 3:53 p.m. and tipped him off. The hedge fund manager then bought more than 217,000 shares of Goldman minutes before the market closed at 4 p.m. The next day, Goldman stock soared on the news of the Berkshire-Hathaway investment. Rajaratnam then sold the Goldman stock just before the market closed, turning a $800,000 profit in just 24 hours, thanks to the tip from Gupta.

In another example cited in the indictment, Gupta was on the phone with Rajaratnam a mere 23 seconds after a Goldman Sachs board meeting. This time, Gupta allegedly told Rajaratnam that Goldman was about to announce big losses. The stock price would surely take a beating when the news surfaced publicly. Rajaratnam quickly dumped his Goldman stock and avoided losses of more than $3.6 million.

The government also charges that Gupta abused his position at Proctor & Gamble by tipping Rajaratnam off to P&G’s financial results for the quarter ending December 2008.

Gupta called Rajaratnam to tell him that P&G would soon release information that its sales would not meet expectations. Galleon funds then sold short approximately 180,000 P&G shares, making, according to the indictment, “an illicit profit of more than $570,000.”

U.S. Attorney Preet Bharara said, “Rajat Gupta was entrusted by some of the premier institutions of American business to sit in their boardrooms…so that he could give advice and counsel for the benefit of their shareholders. 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’s attorney responded, “The government’s allegations are totally baseless. The facts in this case demonstrate that Mr. Gupta is innocent of any of these charges and that he has always acted with honesty and integrity. He did not trade in any securities, did not tip Mr. Rajaratnam so he could trade, and did not share in any profits as part of any quid pro quo.”

In fact, his attorney said, Gupta lost his entire investment in the Galleon Fund at the time of the events in question, removing any motive he may have had for helping Rajaratnam.

Copyright 2011 ABC News Radio


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

ABC News Radio