Jan 31 (Reuters) - Federal prosecutors expanded their
insider trading case against former Goldman Sachs Group Inc
director Rajat Gupta on Tuesday, saying the illegal activity
lasted longer and involved more trades than alleged.
A new indictment filed in Manhattan federal court expanded
the period in which Gupta, 63, supposedly provided illegal tips
to his friend Raj Rajaratnam, the Galleon Group hedge fund
founder now serving an 11-year prison term following his insider
The charges now relate to trades that prosecutors said
Rajaratnam made between March 2007 and January 2009 in the stock
of Goldman and Procter & Gamble Co, where Gupta was also a
Gupta, a former chief of the consulting firm McKinsey & Co,
is the most prominent corporate executive to face insider
trading charges in a wide-ranging federal probe since Rajaratnam
was arrested in October 2009. He has pleaded not guilty.
Gary Naftalis, a lawyer for Gupta, said in a statement the
new charges are baseless and rely on circumstantial evidence.
"The facts in this case demonstrate that Mr. Gupta is
innocent of all of these charges, and that he has always acted
with honesty and integrity," Naftalis said. "(Gupta) 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
A spokeswoman for Rajaratnam's lawyers declined to comment.
NEW DETAILS ALLEGED
While the revised indictment does not accuse Gupta of
directly profiting from suspect trades, its adds details about
his financial relationship with Rajaratnam, including a stake in
four Galleon funds.
Gupta was previously accused of tipping Rajaratnam about
Goldman's activities during the 2008 financial crisis, including
an investment from Warren Buffett's Berkshire Hathaway Inc,
leading to profitable trades for Rajaratnam in September and
October of that year.
The new charges include an allegation that Rajaratnam bought
at least 350,000 Goldman shares on March 12, 2007, soon after
the audit committee of Goldman's board, including Gupta,
discussed the better-than-expected quarterly results that the
bank would release the next day.
They also contend that Rajaratnam on Jan. 29, 2009 sold
180,000 P&G shares short, a bet they would decline, after
learning details from Gupta about the consumer product company's
expected earnings announcement the next day. P&G shares fell 6.4
percent on Jan. 30.
Gupta was global head of McKinsey for nine years until he
retired in 2007. He joined Goldman's board in 2006 and left in
May 2010, seven months after Rajaratnam's arrest. He was also a
director at P&G and American Airlines Corp.
Both indictments charge Gupta with five counts of securities
fraud and one count of conspiracy. Gupta was released on $10
million bail following his arrest. U.S. District Judge Jed
Rakoff presides over the case.
The case is U.S. v. Gupta, U.S. District Court, Southern
District of New York, No. 11-907.
For the prosecution: Preet Bharara, U.S. Attorney.
For Gupta: Gary Naftalis of Kramer Levin Naftalis & Frankel.
(Reporting by Jonathan Stempel and Basil Katz)
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