Gupta Arrested For Tipping Rajaratnam

Oct 26 2011 | 11:45am ET

Rajat Gupta, the highest-placed of Raj Rajaratnam's alleged corporate tipsters, surrendered to the authorities this morning to face criminal insider-trading charges.

Gupta turned himself in to the Federal Bureau of Investigation in New York at about 5:15 a.m. A spokesman for the FBI said that the 62-year-old, who led consulting giant McKinsey & Co. for almost a decade, "is currently in custody and being processed."

He is expected to be formally charged later today. The indictment against him is currently under seal.

Gupta is expected to be accused of passing confidential information about both Goldman Sachs and Proctor and Gamble to Rajaratnam, a longtime friend and business partner. Gupta served on the boards of directors for both companies.

Gupta, who led McKinsey from 1994 until 2003, has consistently denied any wrongdoing. He is not expected to be accused of personally profiting from Rajaratnam's scam, and his lawyer has previously said he lost his entire investment with Galleon.

In an earlier proceeding, since dropped but likely to be revived, the Securities and Exchange Commission accused Gupta of tipping Rajaratnam about a surprise loss by Goldman in 2008 and a $5 billion investment by Berkshire Hathaway in the same year. At Rajaratnam's trial, where he was convicted of all 14 counts, Gupta did not testify, but his voice was heard on several wiretapped telephone calls with Rajaratnam. Goldman CEO Lloyd Blankfein, however, did testify—and said that the information passed by Gupta to the hedge fund manager was confidential.


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