Gupta indicted, gets bail on $10 mn bond

Rajat Gupta, the former Goldman Sachs Group Inc director accused of feeding tips to Galleon Group LLC co-founder Raj Rajaratnam, was charged in an indictment that made him the highest-ranking executive arrested in a nationwide crackdown on insider trading. Gupta, who also sat on the board of Procter & Gamble Co and led McKinsey & Co, was charged with five counts of securities fraud and one count of conspiracy to commit securities fraud in an indictment unsealed yesterday in a Manhattan court.

The indictment alleges that Gupta, 62, of Westport, Connecticut, was a close friend and business associate of Rajaratnam’s who made multi-million dollar investments with him and also passed him inside information after attending board meetings from 2008 through January 2009. The tips generated “illicit profits and loss avoidance” of more than $23 million, the US Securities and Exchange Commission alleged in a lawsuit filed yesterday.

“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,” said Manhattan US Attorney Preet Bharara, whose office is prosecuting the case.

The case shows that corruption has “insinuated itself into the boardrooms of elite companies,” Bharara said. Gupta, who surrendered to the FBI in New York yesterday, pleaded not guilty at his arraignment before a US district judge. Assistant Manhattan US attorney Reed Brodsky, who prosecuted Rajaratnam, told the judge the government’s case included “wiretapped audio calls.”

Gupta was ordered released on a $10 million bond secured by his home after a federal magistrate ordered him to surrender his passport and barred him from leaving the US. His lawyer Gary Naftalis said Gupta had “legitimate reasons” for communicating with Rajaratnam, including a $10 million investment that Gupta had in a fund that Rajaratnam managed.

“The government’s allegations are totally baseless. The facts in this case demonstrate that Gupta is innocent of any of these charges,” he said.