Former Goldman Sachs exec surrenders to FBI
26 Oct, 2011 19:27
Only half-a-minute after a 2008 Goldman Sachs board meeting, Rajat Gupta got out his phone and dialed Raj Rajaratnam. The next morning, his pal sold his stake in the company, saving millions of dollars before they suffered their first quarterly loss.
Three years later, Gupta surrendered to federal authorities this week as he faces charges relating to the insider trading cases that caused his wealthy associate to avoid a financial disaster at the dawn of the Great Recession. The correspondence between the two, attest prosecutors, allowed the men and their associations to benefit immensely off the stock market, making tens of millions of dollars through illegal talks. Rajaratnam was already sentenced earlier this month for his involvement in improper trades, which has earned him 11 years in prison.Gupta, who had a guest spot at President Barack Obama’s first state dinner, was first lobbied with civil fraud charges courtesy of the Securities and Exchange Commissioner back in March. Charges were later dropped however, pending further investigation. In the meantime, Gupta resigned from several high-profile corporate boards, including Procter & Gamble. With five counts of securities fraud and one count of conspiracy to commit coming from a grand jury this morning, Gupta’s legal woes are back, however, and worse than ever.Should Gupta, 62, be convicted of the five counts of security fraud, he stands to receive a maximum of 100 years in prison.Authorities allege that Gupta stood to gain from the loss that should have been for Rajaratnam. Together the pair was involved in a series of businesses partnerships together, including one private equity fund that was co-founded by the men. Prosecutors say that had Rajartnam not followed Gupta’s advice, his groups stood to lose upwards of $23 million."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 US attorney Preet Bharara says 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."In response this morning, Gupta’s lawyer Gary Naftalis issued a statement a few hours after his client surrendered to the FBI in New York City. In his own release, the attorney says that the prosecution’s claims are “baseless” and insists 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," Naftalis adds.The FBI’s investigation of insider trading has been ongoing for four years this far, and for his surrender this morning Bloomberg says Gupta is the "highest-ranking executive to be arrested in the probe.”