NEW YORK (AP) — Federal prosecutors boosted their case Tuesday against a former board member of Goldman Sachs and Procter & Gamble Co., accusing him in a rewritten indictment of participating in additional inside trades that stretched over a two-year period.
An October indictment against Rajat Gupta had alleged that the crimes occurred over a one-year period.
The Westport, Conn., resident faces an April trial on charges that he conspired with billionaire hedge fund boss Raj Rajaratnam to get a trading edge on secrets he learned as a board member. Rajaratnam is serving an 11-year sentence — the longest in history for insider trading — after he was convicted last year. Gupta remains free on $10 million bail.
The new indictment was anticipated in the case and was greeted by defense lawyer Gary P. Naftalis as more of the same from the government.
"As we have stated from the onset, the government's allegations are totally baseless. The newly added charges — like the ones brought last year — are not based on any direct evidence, but rely on supposed circumstantial evidence," he said in a statement. "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. He 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 quo."
Naftalis said communications between Gupta and Rajaratnam were common in part because Gupta wanted information about a $10 million investment he had made in a fund managed by Rajaratnam.
"In fact, Mr. Gupta lost his entire investment in the fund, negating any motive to deviate from a lifetime of probity, integrity and distinguished service," Naftalis said. "We are confident that the government's allegations cannot withstand scrutiny and that Mr. Gupta will be completely exonerated."
The new indictment carries the same number of charges as the earlier one but adds two new trades that stretched the duration of the conspiracy he is charged with to March 12, 2007. It had earlier been described as originating in 2008 and lasting until January 2009.
In the first new trade, Rajaratnam was alleged to have caused his Galleon Group funds to buy at least 350,000 shares of Goldman Sachs stock about 25 minutes after Gupta got off a March 2007 conference call in which he learned that the quarterly earnings report by the Wall Street powerhouse investment firm was better than analysts had expected, the indictment said. The stock jumped $2 in value when results were publicly announced the following day. The indictment added that Gupta participated in the call from the premises of Galleon.
In the other new trade spelled out in the indictment, Gupta listened to a Jan. 29, 2009, telephone meeting of the audit committee of the P&G board before calling Rajaratnam several hours later.
According to the indictment, Gupta told a Galleon portfolio manager the same day that he had received information concerning P&G's sales growth from a contact on the P&G board. Later that day, the indictment added, some Galleon funds shorted 180,000 shares of P&G stock.
Gupta was a former director of Goldman Sachs and the consumer products company Procter & Gamble Co. and a former chief of McKinsey & Co., a highly regarded global consulting firm.
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