SEC Charges Rajat K. Gupta, One Of World’s Top Business Consultants, In Insider Trading Case Involving Raj Rajaratnam, One Of America’s Richest Men
In a case apt to plague Wall Street with questions about whether people on Main Street should trust it, the SEC has accused one of the world’s foremost business consultants with providing illegal “insider trading” tips that lined the corporate pockets of one of the richest men in the world.
Rajat K. Gupta is accused of providing confidential information about the earnings reports of Goldman Sachs and Procter & Gamble to Raj Rajaratnam and also disclosing to Rajaratnam a plan by Warren Buffett’s Berkshire Hathaway to invest $5 billion in Goldman.
Gupta allegedly gleaned the information while serving on the boards of Goldman Sachs and Procter & Gamble. Rajaratnam, the head of Galleon Management, used it virtually immediately either to generate illegal trading profits of millions of dollars or to avoid losing millions of dollars, the SEC charged.
Rajaratnam, who is facing a criminal trial in the Galleon insider-trading case, was listed as No. 236 on the 2009 Forbes magazine list of the 400 richest Americans. Forbes reported that Rajaratnam had assets of $7 billion in 2009.
Gupta, meanwhile, is the chairman of the International Chamber of Commerce, a special adviser to the United Nations, an adviser to the Bill & Melinda Gates Foundation, an adviser to prominent academic institutions in the United States and India — and a board member or former board member of some of the most famous companies in the world. By virtually all accounts, he built a stunningly successful international business career after starting out at McKinsey & Co. in 1973.
Today, though, the SEC accused him of betraying the trust he had built up over decades.
“Gupta was honored with the highest trust of leading public companies, and he betrayed that trust by disclosing their most sensitive and valuable secrets,” said Robert Khuzami, director of the SEC’s Division of Enforcement. “Directors who violate the sanctity of board room confidences for private gain will be held to account for their illegal actions.”
Gupta “voluntarily resigned” from P&G’s board today, the company said in a statement. He left the board of Goldman Sachs last year.
One of the problems with illegal insider trading is that it undermines the public’s confidence in the fairness and integrity of securities markets, the SEC says. It is illegal to trade on material, nonpublic information about a security and to breach a fiduciary duty.
Read the stunning allegations against Gupta, who denies them.