Rajat Gupta did business with Rajaratnam

Rajat Gupta, the Goldman Sachs Group Inc director who is being investigated by the US authorities over his links to Galleon Group LLC founder Raj Rajaratnam, had a long-standing business relationship with the billionaire hedge fund manager.

Interviews, public records, lawsuits and regulatory filings show a 13-year history of co-investing and other business collaborations between Gupta, 61, the former worldwide head of consulting firm McKinsey & Co, and Rajaratnam, 52, the central figure in the Galleon insider trading probe.

Rajaratnam has a stake in a fund managed by New Silk Route NSR Partners LLC, founded by Gupta and three others in 2006 to invest in South Asian companies, according to a New Silk Route spokeswoman. The fund owns stakes in at least 11 Indian companies, including cell phone tower operator Reliance Infratel Ltd and the Cafe Coffee Day chain. "Rajaratnam has had a well-known relationship with Gupta for many years, and it is one that he is both proud and fond of," Rajaratnam's spokesman, Jim McCarthy, said yesterday in a statement.

"Their association as investors has led to many successful ventures around the world and made a large and positive impact for a long list of worthy businesses and charities. But just as important, they have always conducted those efforts with integrity and diligent attention to sound, ethical practices."

Criminal Charges
Rajaratnam, who was arrested October 16, is fighting criminal charges and the US Securities and Exchange Commission civil claims that he used inside information to trade shares of companies including Advanced Micro Devices Inc. He denies any wrongdoing.

The US investigators are examining whether Gupta tipped off Rajaratnam to a $5 billion investment in Goldman Sachs by Warren Buffett's Berkshire Hathaway Inc, a person with direct knowledge of the inquiry said April 23.

"In any insider trading investigation, prosecutors will be looking at relationships to try to determine if any improper information was passed between them," said Robert Mintz, a former federal prosecutor in New Jersey who is a partner with McCarter & English. "The nature of the relationship, the length of the relationship, the frequency of contact and the subsequent investing strategy are all areas that are likely to be scrutinized."

Gupta, who earned an MBA at Harvard Business School, serves on the boards of American Airlines parent AMR Corp, Procter & Gamble Co, Harman International Industries Inc, Genpact Ltd., the business outsourcing company, and Russia's Sberbank.