Rajat K. Gupta, the most prominent businessman linked to a far-reaching insider trading investigation, is facing criminal charges and surrendered to FBI agents on Wednesday, marking a stunning turn in the aggressive pursuit of white collar by U.S. Attorney Preet Bharara of the Southern District of New York.
Gupta was charged with one count of conspiracy to commit securities fraud and five counts of securities fraud and pleaded not guilty to the charges.
Yet, as momentous as the charges against Gupta are, they would not be a total surprise, as his name has figured prominently in the case of Raj Rajaratnam, the billionaire ex-hedge fund wizard who is headed to federal prison for 11 years for conspiracy and securities fraud.
Indeed, Rajaratnam has said that investigators pressured him intently to implicate Gupta, as Main Justice reported on Tuesday.
Gupta, 62, the longtime head of McKinsey & Company, was a director of Goldman Sachs and Procter & Gamble and a friend of Rajaratnam. The Securities and Exchange Commission accused Gupta, in an administrative proceeding, of passing confidential information on Goldman and P&G to Rajaratnam, who then used that information to glean millions in illicit profits.
The SEC dropped the case against Gupta in August (see our report), for reasons that were not clear. Even so, prosecutors called Gupta a co-conspirator with Rajaratnam during the latter’s trial. Gupta’s lawyers have labeled the accusations against their client baseless and have described him as “an innocent man.”
“It is unclear what has changed since the SEC dropped its case in August,” The Times reported, noting that the SEC declined to comment. But, in view of the government’s tactics against Rajaratnam, the possibility of one or more witnesses against Gupta — perhaps seeking leniency themselves — cannot be ruled out. Rajaratnam was undone by the testimony of former friends and wiretapped conversations in which he was heard discussing confidential data (see our report after his conviction).
The Times said the SEC is expected to file a new civil case against Gupta, which would parallel the criminal case.
Gupta has enjoyed the friendship of some of the most prominent people in the world of business and finance and made millions of dollars a year. But a tape recording of one of Rajaratnam’s conversations during his trial suggested that Gupta wanted to be really rich, as in billionaire.
