Insider trading: Rajat Gupta says SEC charges 'baseless'

Indian-American Rajat Gupta, a former board member of Goldman Sachs and Procter and Gamble, has rubbished the charges of insider trading against him as “baseless” with his lawyer asserting that his conduct and integrity were “beyond reproach’’.

“The SEC’s allegations are totally baseless,” Mr Gary Naftalis, Counsel for Mr Gupta, said in a statement to PTI.

“Mr Gupta’s 40-year record of ethical conduct, integrity, and commitment to guarding his clients’ confidences is beyond reproach,” he said.

Mr Naftalis said Mr Gupta has done nothing wrong and is confident that the “unfounded allegations” will be rejected by any fair and impartial fact finder.

“There is no allegation that Mr Gupta traded in any of these securities or shared in any profits as part of any quid pro quo,” he wrote.

“In fact, Mr Gupta had lost his entire $10-million investment in the GB Voyager Fund managed by Mr Rajaratnam at the time of these events, negating any motive to deviate from a lifetime of honesty and integrity,” Mr Naftalis said in defence of his client.

His comment came hours after the SEC accused Mr Gupta of illegally tipping Galleon Management founder and hedge fund manager Mr Raj Rajaratnam with inside information about the quarterly earnings at both the firms as well as an impending $5 billion investment by Berkshire Hathaway in Goldman.

SEC alleges that Mr Gupta, a friend and business associate of Mr Rajaratnam, provided him with confidential information learned during board calls and in other aspects of his duties on the Goldman and P&G boards.

Mr Rajaratnam used the inside information to trade on behalf of some of Galleon’s hedge funds, or shared the information with others at his firm who then traded on it ahead of public announcements by the firms, it said.

The insider trading by Mr Rajaratnam and others generated more than $18 million in illicit profits and loss avoidance.

Mr Gupta was at the time a direct or indirect investor in at least some of these Galleon hedge funds, and had other potentially lucrative business interests with Mr Rajaratnam, SEC said.

The Indian-American was honoured with the highest trust of leading public companies, and he betrayed that trust by disclosing their most sensitive and valuable secrets, Mr Robert Khuzami, Director of the SEC’s Division of Enforcement, said.

“Directors who violate the sanctity of board room confidences for private gain will be held to account for their illegal actions,” he said.

SEC alleges that while a member of Goldman’s board of directors, Mr Gupta tipped Mr Rajaratnam about Berkshire Hathaway’s $5-billion investment in Goldman and Goldman’s upcoming public equity offering before that information was publicly announced on September 23, 2008.

Mr Gupta called Mr Rajaratnam immediately after a special telephonic meeting at which Goldman’s board considered and approved Berkshire’s investment in Goldman Sachs and the public equity offering.

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