The Wall Street Journal reports that in a six-count indictment, federal prosecutors in Manhattan alleged that Gupta, former head of global consulting firm McKinsey & Co., leaked details about the companies’ financial condition and an investment by Warren Buffett’s Berkshire Hathway Inc. to former hedge-fund titan Raj Rajaratnam. The Galleon Group founder was sentenced earlier this month to serve 11 years in prison for insider trading, the news report said.
Gupta surrendered to the Federal Bureau of Investigation and was charged with one count of conspiracy to commit securities fraud and five counts of securities fraud. He faces up to 20 years in prison on each fraud charge.
The Securities and Exchange Commission (SEC) also separately brought related civil insider-trading charges against Gupta and added additional civil allegations against Rajaratnam regarding alleged improper trades in P&G.
The criminal charges against Gupta come amid the government’s crackdown on what it describes as rampant illegal trading on Wall Street. Since late 2009, federal prosecutors in Manhattan have charged 55 individuals with insider trading, resulting in 51 convictions or guilty pleas (see SEC Snags More in Galleon Insider Trading Scandal).
According to the WSJ, the charges against Gupta show the government believes he provided inside information to Rajaratnam because of their friendship and business relationships rather than receiving direct payments for the information. According to the indictment, Gupta allegedly gave Rajaratnam details he had learned at Goldman board meetings in 2008 about a $5 billion investment in the bank by Buffett’s Berkshire Hathaway Inc. and about Goldman’s first ever quarterly loss as a public company. Gupta has denied previously denied those allegations.
Gupta also allegedly leaked information about the corporate earnings of Procter & Gamble in January 2009, where he also served on the board, according to the indictment.
McKinsey hasn’t been accused of any wrongdoing in the insider-trading matter. McKinsey couldn’t immediately be reached for comment.
Neither Goldman nor P&G has been accused of any wrongdoing in the insider-trading matter. Both firms declined to comment to the Wall Street Journal.