Bloomberg News

SEC Sues Rajat Gupta for Passing Inside Tips in Galleon Matter

October 26, 2011

Oct. 26 (Bloomberg) -- Rajat Gupta, the former Goldman Sachs Group Inc. director facing criminal insider trading charges, was sued today by the U.S. Securities and Exchange Commission over related civil claims that he passed billionaire Raj Rajaratnam confidential information about companies where he served on the board.

Gupta, 62, illegally tipped Rajaratnam with inside information about the quarterly earnings of both Procter & Gamble Co. and Goldman Sachs as well as an impending $5 billion investment in Goldman Sachs by Berkshire Hathaway in 2008, the SEC said in a complaint filed today at U.S. District Court in Manhattan.

“Any allegation that Rajat Gupta engaged in any unlawful conduct is totally baseless,” his lawyer, Gary Naftalis, said in an e-mailed statement yesterday. “He did not trade in any securities, did not tip Mr. Rajaratnam so he could trade, and did not share in any profits as part of any quid pro quo.”

Rajaratnam was convicted of conspiracy and securities fraud by a Manhattan federal jury in May and sentenced to 11 years in prison on Oct. 13. More than 50 people have been charged in the probe. The SEC has brought civil claims against 29 defendants in the matter, which the agency said generated more than $90 million in illicit profits. Rajaratnam caused various Galleon funds to trade based on Gupta’s tips, generating illicit profits or loss avoidance of more than $23 million, the SEC said.

“Gupta was honored with the highest trust of leading public companies, and he betrayed that trust by disclosing their most sensitive and valuable secrets to the disadvantage of investors, shareholders, and fellow directors,” SEC Enforcement Director Robert Khuzami said in a statement. “Directors who exploit board room confidences for private gain can be certain they will ultimately be held responsible for their illegal actions.”

--Editors: Lawrence Roberts, Gregory Mott

To contact the reporter on this story: Joshua Gallu in Washington at jgallu@bloomberg.net

To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net


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