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Ex-business titan Gupta guilty of insider trading


NEW YORK (Reuters)—Rajat Gupta, a consummate business insider who once sat on the board of Goldman Sachs Group Inc., was convicted on Friday of leaking secrets about the investment bank at the height of the financial crisis, a major victory for prosecutors seeking to root out insider trading on Wall Street.

The Manhattan federal court jury delivered its verdict on its second day of deliberations, finding that Mr. Gupta had fed stock tips to his hedge fund manager friend Raj Rajaratnam that he had gleaned from confidential Goldman board meetings.

Mr. Gupta is also a former director at Procter & Gamble Co. and a former executive at the elite business consulting firm McKinsey & Co. He is the most prominent person convicted in the government's crackdown in the last few years on illicit trading involving hedge funds and financial consultants.

The 63-year-old Mr. Gupta was found guilty of three counts of securities fraud and one count of conspiracy. The jury acquitted him on two other securities fraud charges.

He could receive up to 25 years in prison. The maximum sentence for securities fraud is 20 years, and the maximum sentence for conspiracy is five years, though it seems unlikely that he would receive such a heavy punishment. Mr. Rajaratnam was convicted of 14 counts of securities fraud and conspiracy last year and is serving an 11-year prison term.

After the verdict, an ashen-faced Mr. Gupta glanced grimly back at his wife and four daughters in the courtroom. Later, the family stood hugging each other in the courtroom as Mr. Gupta tried to console his distraught daughters.


His defense lawyer, Gary Naftalis, said Mr. Gupta is likely to appeal.

Since being implicated in the Rajaratnam case more than a year ago, Mr. Gupta has denied the charges. In addition to his business background, the Indian-born Mr. Gupta was known for his work with philanthropies fighting AIDS, malaria and tuberculosis in developing countries.

After the verdict, jury foreman Rick Lepkowski said he was impressed by Mr. Gupta's life story and the support he received from his family, who regularly sat in the front row of the courtroom during the trial.

"I wanted to believe the allegations weren't true," said Mr. Lepkowski, a nonprofit group executive from Ossining, N.Y. "At the end of the day, when all of the evidence was in, it was in my opinion, overwhelming."

Among the most dramatic contentions against Mr. Gupta was prosecutors' charge that he had told Mr. Rajaratnam about a crucial $5 billion injection into Goldman by Warren Buffett's Berkshire Hathaway Inc. at the height of the financial crisis.

Part of the prosecution's evidence was that within a minute of disconnecting from a Sept. 23, 2008, board call approving the investment, Mr. Gupta called Mr. Rajaratnam at his Galleon Group office in New York. Mr. Rajaratnam then hurriedly ordered his traders to buy as much as $40 million in Goldman stock because only minutes remained before the market closed.

At trial, Mr. Gupta's lawyers argued that prosecutors "had no real, hard, direct evidence" against Mr. Gupta, who did not take the witness stand.

U.S. District Judge Jed Rakoff has set sentencing for Oct. 18.

The case is USA vs. Gupta, U.S. District Court for the Southern District of New York, No. 11-907.