Insider trading: Ex-Goldman board member arrested
Insider trading charges brought against former Goldman director Rajat Gupta. Charges stem from insider trading case that netted Raj Rajaratnam 11 years in prison.
A former board member of Goldman Sachs and Proctor & Gamble became the most prominent business executive arrested in the biggest insider trading case in history when a securities fraud indictment was unsealed against him Wednesday.Skip to next paragraph
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Gupta, 62, of Westport, Conn., quietly surrendered early Wednesday at the FBI's New York City office, located a few blocks north of the ongoing Occupy Wall Street demonstration against corporate greed. His lawyer called the allegations "totally baseless."
He was awaiting an arraignment on one count of conspiracy to commit securities fraud and five counts of securities fraud. The charges carry a potential penalty of 105 years in prison.
The indictment unsealed in U.S. District Court in Manhattan alleges Gupta shared confidential information about both Goldman Sachs and Procter & Gamble at the height of the financial crisis from 2008 through January 2009, knowing that Rajaratnam would use the secrets to buy and sell stock ahead of public announcements.
In a release, U.S. Attorney Preet Bharara said Gupta broke the trust of some of the nation's top public companies and "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."
Alluding to the wide scope of the prosecution, he added: "Today we allege that the corruption we have seen in the trading cubicles, investment firms, law firms, expert consulting firms, medical labs, and corporate suites also insinuated itself into the boardrooms of elite companies."
FBI Assistant Director-in-Charge Janice Fedarcyk said the arrest was the latest to occur in an initiative launched by the FBI in 2007 against hedge fund cheats.
"The conduct alleged is not an inadvertent slip of the tongue by Mr. Gupta," she said. "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."
Gupta's lawyer, Gary P. Naftalis, said in a statement Wednesday that his client only had legitimate communications with Rajaratnam.
"The government's allegations are totally baseless," he said. "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. ... We are confident that these accusations - which are based entirely on circumstantial evidence - cannot withstand scrutiny and that Mr. Gupta will be completely exonerated of any wrongdoing."