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Gupta convicted of insider trading

Rajat Gupta, left, and attorney Gary Naftalis leave federal court Friday in New York. (Associated Press)
Rajat Gupta, left, and attorney Gary Naftalis leave federal court Friday in New York. (Associated Press)

Ex-Goldman Sachs director found guilty on four counts

NEW YORK – Former Goldman Sachs board member Rajat Gupta lived the American dream before being led astray by a wealthy friend who was a master at insider trading.

That was the view of two jurors who on Friday voted with 10 others to convict Gupta of three counts of securities fraud and one count of conspiracy for sharing corporate secrets with hedge fund manager Raj Rajaratnam.

With the verdict, Gupta, 63, became the most prominent defendant convicted so far in a wide-ranging Wall Street inquiry conducted by investigators armed with wiretaps.

Prosecutors had alleged that Gupta’s tips gave Rajaratnam an edge over ordinary investors on trades of more than 350,000 shares of Goldman stock in 2008.

The jury reached a not-guilty verdict on two other securities fraud counts after less than two days of deliberations at the insider trading trial in federal court in Manhattan.

In a statement, FBI Assistant Director Janice K. Fedarcyk called the conviction “the latest milestone in an FBI initiative undertaken in 2007 to zero in on illegal conduct in the hedge fund industry.”

Defense attorney Gary Naftalis called the outcome a disappointment.

“We believe the facts of this case demonstrate that Mr. Gupta is innocent,” he said. “He always acted with honesty and integrity.”

Less than a month after Rajaratnam was sentenced to 11 years in prison, Gupta was charged in a separate case built on the some of the same wiretap and other evidence.

During the trial that began May 20, the government highlighted a Sept. 23, 2008, phone call it said was made from Gupta to Rajaratnam. The call came only minutes after Gupta had learned during a confidential conference call about how Warren Buffett’s Berkshire Hathaway planned to invest $5 billion in Goldman – a blockbuster deal that wouldn’t be announced until the stock market closed at 4 p.m.

“That news was going to be very good news for Goldman Sachs,” prosecutor Richard Tarlowe said in closing arguments. “The average ordinary investor had no way of knowing that. … Until the announcement, it was confidential.”

Records showed that moments after the phone call ended at 3:55 p.m., Rajaratnam purchased $40 million in Goldman stock – an eleventh-hour trade that ended up making him nearly $1 million.

The most serious charge against Gupta, securities fraud, carries a maximum term of 20 years. Sentencing was set for Oct. 18.


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