With Gupta’s Arrest, Insider Inquiry Goes Beyond Wall St

The NY Times reports that with Mr. Gupta, the campaign has moved beyond financial professionals. As the head of McKinsey & Company, the prominent consulting firm, Mr. Gupta advised some of the world’s most influential people, rubbing elbows with the chief executive of General Electric, Jeffrey R. Immelt, and the former President Bill Clinton.

Mr. Gupta’s case has been tricky for the government. Although his name came up repeatedly at Mr. Rajaratnam’s trial, both in testimony and in secretly recorded phone conversations, the Justice Department never brought charges against him.

The S.E.C. filed an administrative action against Mr. Gupta. In response, he filed a separate lawsuit, asking to move the case to federal court, where it would be heard by a jury. Judge Rakoff allowed Mr. Gupta’s suit to move forward in July, saying the S.E.C. took a “cavalier approach” in approving the administrative proceeding. The agency later dropped the matter, but reserved the right to refile.

On Wednesday, the S.E.C. filed a civil complaint against Mr. Gupta and Mr. Rajaratnam, claiming an “extensive insider trading scheme.” It mirrored the agency’s earlier action against Mr. Gupta.

“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,” Robert S. Khuzami, director of the S.E.C.’s division of enforcement, said in a statement.

According to the indictment, Mr. Gupta gave Mr. Rajaratnam advance word of Warren E. Buffett’s $5 billion investment in Goldman during the financial crisis. After hanging up from a special board meeting in September 2008, Mr. Gupta called Mr. Rajaratnam within 16 seconds, prosecutors said. Moments later, Mr. Rajaratnam purchased shares in Goldman, ultimately netting about $840,000, according to the indictment…
In past Galleon-related trials, the government relied heavily on the use of wiretaps and recordings to make its case. But prosecutors may not have the same breadth of evidence this time, since the Goldman discussions between Mr. Rajaratnam and Mr. Gupta were not taped. Instead, the government has conversations between Mr. Rajaratnam and his employees....



There's more at http://dealbook.nytimes.com/2011/10/26/gupta-surrenders-to-authorities-on-insider-trading/