Ex-McKinsey Chief May Have Been Rajaratnam Goldman Source

Apr 15 2010 | 1:48pm ET

The former head of McKinsey & Co. may have passed inside information about Goldman Sachs—where he sits on the board of directors—to Galleon Group founded Raj Rajaratnam.

The potential Goldman link to the sprawling insider-trading case comes just weeks after prosecutors told Rajaratnam’s defense team that it was now looking into Galleon’s trading of Goldman shares in 2008. According to The Wall Street Journal, Rajaratnam’s source at Goldman was Rajat Gupta, a longtime friend and associate of Rajaratnam’s who headed McKinsey from 1994 until 2003.

Gupta has not been charged in the case, and his own trading is not believed to be part of the investigation. In their letter last month, prosecutors did say the ongoing investigation was likely to include “identification of additional uncharged co-conspirators.”

Four years ago, Rajaratnam, Gupta and former Goldman executive Mark Schwartz founded a South Asia alternative investments firm, Taj Capital. While Rajaratnam has since cut ties with that firm, now called New Silk Route, managing $1.4 billion in private equity funds, Gupta remains its chairman.

According to the Journal, the two men spoke frequently. Gupta was also a frequent invitee to parties hosted by Galleon.

In addition to being the first possible Goldman tie to the Galleon case, Gupta is also the second McKinsey link. Former consultant Anil Kumar in January pleaded guilty and is cooperating with investigators. He claims Rajaratnam paid him millions for confidential information about Advanced Micro Devices.

Rajaratnam and his co-defendant, former New Castle Partners executive Danielle Chiesi, are set to go on trial in October. A total of 21 people have been charged in the case; 11 have pleaded guilty.

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