A federal jury Friday found former Goldman Sachs (NYSE: GS) director Rajat Gupta guilty on four criminal counts stemming from accusations of insider trading at the highest levels of U.S. finance.
Gupta, who was acquitted of two other charges, was accused of funneling inside information gleaned from his perch inside Goldman’s board to convicted former hedge fund manager Raj Rajaratnam.
Rajaratnam was convicted last year as part of a wide-ranging investigation into insider trading by federal prosecutors targeting hedge fund managers and their information sources. Dozens of traders and information conduits have been charged so far and more have been promised.
Gupta, 63, was found guilty of three counts of securities fraud and one count of conspiracy. He was acquitted of two other fraud counts. Each fraud count carries a maximum penalty of 20 years in prison and the fraud count a maximum of five years. In all Gupta faces 65 years in jail.
"Having fallen from respected insider to convicted inside trader, Mr. Gupta has now exchanged the lofty board room for the prospect of a lowly jail cell.”
The jury deliberated for less than two days following four weeks of testimony in a federal courtroom in lower Manhattan.
As a board member for Goldman Sachs, Gupta was accused of leaking information to Rajaratnam at Rajaratnam’s hedge fund Galleon Group concerning deals that involved both Goldman and Proctor & Gamble (NYSE: PG), on whose board Gupta was also a member.
Gupta rose to the very top of U.S. finance as managing partner of consulting firm McKinsey & Co. from 1994 to 2003.
It was the second high-profile conviction in the sweeping insider trading case spearheaded by Manhattan U.S. Attorney Preet Bharara, coming on the heels of Rajaratnam’s last year. Rajaratnam, who was sentenced to 11 years in jail, is appealing his conviction.
Bharara issued a statement following the conviction saying: “Rajat Gupta once stood at the apex of the international business community. Today, he stands convicted of securities fraud. He achieved remarkable success and stature, but he threw it all away. Having fallen from respected insider to convicted inside trader, Mr. Gupta has now exchanged the lofty board room for the prospect of a lowly jail cell.”
Bharara said Gupta violated “clear and sacrosanct duties of confidentiality” by “illegally (providing) a virtual open line into the board room for his benefactor and business partner, Raj Rajaratnam.”
Sentencing for Gupta is scheduled for October 18.
Unlike the case against Rajaratnam, in which wiretaps caught the hedge fund manager seemingly imploring his employees to commit criminal acts, the case against Gupta was circumstantial.
A key piece of evidence included phone records that showed Gupta called Rajaratnam minutes after leaving a Goldman board meeting at which confidential information was discussed.
Gupta did not testify in his own defense.