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October 26, 2011

Feds indict former Goldman Sachs director for insider trading

More big news for white-collar crime fans, as detailed in this New York Times report:

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.

Mr. Gupta, 62, is accused of leaking corporate secrets on Goldman Sachs 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 Mr. Gupta with one count of conspiracy to commit securities fraud and five counts of securities fraud, all related to tips on Goldman Sachs in 2008.

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,” 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.”

Gary P. Naftalis, a lawyer for Mr. Gupta, said in a statement on Tuesday: “The facts demonstrate that Mr. Gupta is an innocent man and that he acted with honesty and integrity.”

Authorities have broadly pursued insider trading on Wall Street, exacting guilty pleas from a chemist at the Food and Drug Administration, among others, as recently as this month. In the past two years, authorities have charged 56 people with insider trading, including Mr. Gupta; of those, 51 have pleaded guilty or have been convicted of swapping illegal tips about company earnings and other major corporate events.  While the majority of those charged have been traders and analysts on Wall Street, Mr. Gupta is the first executive to be implicated from the upper echelons of corporate America.

The charges are a stunning reversal of fortunes for Mr. 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 & Gamble and the parent company of American Airlines.  In addition to his professional pedigree, Mr. Gupta was a noted philanthropist, serving in coveted posts with the Bill and Melinda Gates Foundation.

The full 22-page, six-count federal indictment against Rajat Gupta can be accessed at this link.

It is especially fun to start speculating about how Gupta's renown defense attorney may be advising Gupta concerning his realistic sentencing exposure and potential plea options in the wake of Rajaratnam's (and other insiders') conviction and sentencing.  Even if Gupta believes he is innocent and wishes to vindicate his name through a full-blown federal criminal trial — indeed, even if Gupta is truly innocent and actually has a real good chance of clearing his name through a full-blown federal criminal trial — his defense attorney is duty-bound to explain to him that his realistic sentencing exposure is surely much greater if he goes to trial and loses than if he pleads guilty.

October 26, 2011 at 01:47 PM | Permalink

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Comments

Just Another Guy

☺ Perhaps we can all agree, that at least he grossly abused his discretion. ☺

Posted by: JAG | Oct 27, 2011 9:05:08 AM

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