SEC Accuses Ex-Goldman Board Member of Insider Trading
Rajat K. Gupta, a former Goldman Sachs board member, was accused by the SEC of passing confidential inside information to Galleon group founder Raj Rajaratnam, according to Bloomberg news. Not only did Mr. Gupta pass on quarterly earning information for Goldman but he also provided tips for Proctor & Gamble Company, where he was a board member, as well.
SEC Enforcement Director Robert Khuzami said that “Gupta was honored with the highest trust of leading public companies and he betrayed that trust by disclosing their most sensitive and valuable secrets.” In addition to Goldman and P&G, Gupta has served as a board member for American Airlines parent AMR Corporation, Harman International, Genpact, Inc. and Russia’s Sberbank.
There is no allegation that Gupta shared in any profits from trades made. To the contrary, he lost his entire investment of $10 million in a fund managed by Rajaratnam during the time in question. However, Galleon made profits of more than $900,000 on one trade of Goldman shares in September 2008. Galleon also generated illicit profits from inside information of $13.6 million and $570,000 for the second quarter and the fourth quarter, respectively.
Mr. Gupta announced he would not stand for re-election to the board in March 2010, without providing a reason. On April 15, 2010, the Wall Street Journal reported that he was being investigated for passing tips to Rajaratnam.