NEW YORK | Wed Mar 2, 2011 2:24am EST
NEW YORK (Reuters) - A former Goldman Sachs director leaked secret
details to Galleon Group hedge fund manager Raj Rajaratnam about
Warren Buffett's plot to invest $5 billion (3 billion pounds) in the
Wall Street bank at the height of the financial crisis, a U.S.
securities regulator charged.
The U.S. Securities and Exchange Commission said the director, Rajat
Gupta, tipped Rajaratnam by phone just minutes before the public
learned of the investment by Buffett's Berkshire Hathaway Inc
(BRKa.N)(BRKb.N), which helped make sure Goldman's stability.
Gupta, a former worldwide administration director at consulting firm
McKinsey & Co, was also accused of tipping Rajaratnam about quarterly
earnings at Goldman and Procter & Gamble Co (PG.N), where he was a
director before resigning on Tuesday.
The 62-year-ancient Gupta is one of the highest-reputation corporate
executives implicated in the government's wide-ranging insider
trading probe, which has resulted in criminal or civil charges
against dozens of individuals.
Tuesday's charges mark the first time that activity said to have
occurred at Goldman was directly implicated in the probe.
The SEC said Rajaratnam, who faces a March 8 criminal insider trading
trial, used the tips to trade at his firm, Galleon Group, reaping
more than $18 million of illegal gains. It said Gupta invested in at
least some Galleon hedge funds.
"Gupta was honored with the highest trust of leading public
companies, and he betrayed that trust by disclosing their most
sensitive and valuable secrets," SEC enforcement chief Robert Khuzami
said in a proclamation. "Directors who violate the sanctity of board
room confidences for private gain will be held to account for their
illegal actions."
The SEC started administrative and stop-and-desist proceedings
against Gupta. It described Gupta as a "friend and business
associate" of Rajaratnam.
"Based on the allegations in the order instituting the administrative
proceedings, it appears the SEC has a powerful, circumstantial case
against Gupta," said Kathleen Hamm, administration director at
Promontory Financial Group in Washington and a former SEC enforcement
official.
Source: Reuters.Com
