UPDATE (adds lawyer denial) The Securities and Exchange Commission today announced a civil administrative proceeding alleging insider trading against a Westport-based business consultant who has served on the boards of directors at Goldman Sachs and Procter & Gamble.
Rajat K. Gupta: Beachside Ave. resident charged. World Economic Forum photo
The agency said Rajat K. Gupta, 62, a resident of Beachside Avenue in Westport’s Greens Farms area who formerly headed McKinsey & Co., allegedly tipped off Galleon Management founder and hedge fund manager Raj Rajaratnam with inside information about the quarterly earnings at both firms as well as an impending $5 billion investment by Berkshire Hathaway in Goldman.
The SEC’s Division of Enforcement alleges that Gupta, a friend and business associate of Rajaratnam, provided him with confidential information learned during board calls and in other aspects of his duties on the Goldman and P&G boards.
Rajaratnam used the inside information to trade on behalf of some of Galleon’s hedge funds, or shared the information with others at his firm who then traded on it ahead of public announcements by the firms, the SEC said.
The insider trading by Rajaratnam and others generated more than $18 million in illicit profits and loss avoidance. Gupta was at the time a direct or indirect investor in at least some of these Galleon hedge funds, and had other potentially lucrative business interests with Rajaratnam, the SEC said.
The SEC has previously charged Rajaratnam and others in a widespread insider trading scheme involving the Galleon hedge funds. He has fought the charges and his trial is scheduled to begin next week in downtown Manhattan. Prosecutors have not filed criminal charges against Gupta.
Rajat Gupta purchased his 8-bedroom, 8-bath home on Beachside Avenue in 1999. Built in 1920 and once owned by J.C. Penney, it is valued as just under $12.5 million. (CLICK TO ENLARGE) Dave Matlow for WestportNow.com
“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.”
Gary Naftalis, a lawyer for Gupta, said the SEC’s charges are “totally baseless.”
“Mr. Gupta’s 40-year record of ethical conduct, integrity and commitment to guarding his clients’ confidences is beyond reproach,” Naftalis said. “Mr. Gupta has done nothing wrong and is confident that these unfounded allegations will be rejected by any fair and impartial fact finder.”
Dow Jones reported that John Nester, an SEC spokesman, declined to comment on why the regulator pursued an administrative proceeding, rather than a civil lawsuit against Gupta.
Potential relief that could be imposed by the administrative panel includes disgorgement of ill-gotten gains, civil penalties and a bar from serving as an officer or director of a publicly traded company, Dow Jones said.
Gupta headed McKinsey from 1994 to 2003 and left the consulting firm in 2007. He voluntarily stepped down from Procter & Gamble Co.‘s board today, the company said after the SEC charges were announced. A company spokesman said he had resigned to prevent any distraction to the P.&G. board and the business. 
Rajat Gupta hosted a 2008 fund-raiser at his Greens Farms home for Speaker of the House Nancy Pelosi and U.S. House candidate Jim Himes. (CLICK TO ENLARGE) WestportNow.com photo
Gupta remains a member of the board of AMR, the parent company of American Airlines. A company spokesman had no comment on the charges today. Gupta served on Goldman’s board from November 2006 to May 2010
Gupta and his wife Anita have maintained a relatively low profile in Westport, as is the case with most of the wealthy inhabitants along Beachside Avenue.
In September 2008, the couple did open their home for a Democratic fund-raiser for Jim Himes, the now second-term Democrat representing the 4th Congressional District. Special guest was Nancy Pelosi, then Speaker of the House.
According to public records, the Guptas purchased the 8-bedroom, 8-bath, 1920-built home on 2.28 acres in 1999 for $6.125 million. The home, once owned by legendary retailer J.C. Penney, was assessed in the latest revaluation at $12.482 million.
It is so interesting to know who your neighbors are….!
He doesn’t look too happy in the photo.