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Entries in Rajat Gupta (2)

Wednesday
Oct262011

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

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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