Legal News

Galleon Insider-Trading Probe Fingers Former McKinsey Head

By Ashby Jones

The sprawling and ever-growing insider-trading investigation spearheaded by both the DOJ and SEC just continues to roll on. Every few days, it seems, another fish gets ensnared.

Today’s fish is pretty big: Rajat Gupta, the former head of McKinsey & Co.

The SEC on Tuesday sued Gupta, claiming he provided improper tips to Galleon Group founder Raj Rajaratnam about companies in which he was a board member, including a $5 billion investment in Goldman Sachs Group Inc. by Warren Buffett’s Berkshire Hathaway. Click here for the WSJ story; here for the SEC’s complaint.

Gupta, who headed McKinsey from 1994 to 2000, was charged with insider trading in a civil administrative proceeding filed by the SEC’s Division of Enforcement on Tuesday. He left the consulting firm in 2007.

Gupta, a former director at Goldman and and board member with Procter & Gamble Co., allegedly provided Rajaratnam with tips about the results for both companies, in addition to the Berkshire investment in 2008. Rajaratnam is slated to go to trial next week in a closely watched insider-trading case.

“Gupta was honored with the highest trust of leading public companies, and he betrayed that trust by disclosing their most sensitive and valuable secrets,” said Robert Khuzami, director of the SEC’s Division of Enforcement. “Directors who violate the sanctity of board room confidences for private gain will be held to account for their illegal actions.”

A lawyer for Gupta didn’t immediately return a phone call seeking comment Tuesday. Mr. Gupta’s lawyer previously said that Gupta has “neither violated any law nor done anything else improper.”

Full post as published by Law Blog - WSJ.com on March 01, 2011 (boomark / email).