Rajat Gupta found guilty of insider trading

Rajat Gupta, the iconic figure of Indian success on Wall Street, was found guilty yesterday of passing confidential market information to Galleon hedge fund founder Raj Rajaratnam in one of the biggest insider trading cases in the US.

Gupta was found guilty of providing insider information to his former friend, Rajaratnam by a Manhattan court. Rajaratnam is serving an 11-year jail sentence after his conviction in the same court last year for insider trading.

Gupta was found guilty on four counts out of six charges, and will be sentenced on 18 October.

Gupta was accused of providing market-moving information to Rajaratnam while serving on the board of Goldman Sachs and heading McKinsey&Co.

The high-profile trial got under way on 21 May this year and lasted three weeks.

The heaviest sentence in securities fraud carries a 20-year jail term, while conspiracy carries a five-year maximum prison sentence.

Gupta would, however, remain free on bail until his sentencing.

Gupta's conviction comes on three counts of securities fraud and one count of conspiracy for passing on confidential boardroom information about Goldman and Proctor & Gamble companies to the hedge fund that earned millions of dollars trading on his tips.

Gupta was acquitted of two counts of securities fraud.

He was found guilty of passing on information about Warren Buffett's Berkshire Hathaway Inc's $5 billion investment in Goldman stock on 24 October 2008.

His wife and four daughters broke down as the sentence was read out; Gupta however, sat expressionless.

The verdict is being seen as a major victory for US prosecutors as the government clamps down on corporate fraud on Wall Street.

''Mr. Rajat Gupta once stood at the apex of the international business community. Today, he stands convicted of securities fraud. He achieved remarkable success and stature, but he threw it all away,'' said Indian-origin chief Manhattan prosecutor Preet Bharara said in a statement.

''Having fallen from respected insider to convicted inside trader, Mr Gupta has now exchanged the lofty boardroom for the prospect of a lowly jail cell,'' he said.

Born in Maniktala in Kolkata, son of a freedom fighter-turned-journalist father and a school teacher mother, Gupta was orphaned at the age of 18.

Gupta ranked 15 in the IIT entrance exam of 1966, and was admitted to IIT Delhi on a scholarship from where he graduated with a B-Tech degree in Mechanical Engineering.

He then came to the US and was placed at the top of his class at the prestigious Harvard Business School where he studied on a scholarship.

He joined consulting giant McKinsey and quickly rose through the ranks.

In 1994, he was made the global head of the firm, the first non-American to hold that position.

Gupta was board members at some of the biggest US companies. After a 10 year stint at McKinsey, Gupta joined the boards of many corporations and nonprofit organisations.

In addition to Procter & Gamble and Goldman, Gupta was also director of the AMR Corporation, the parent company of American Airlines.

He was appointed a trustee by the Rockefeller Foundation and was named an adviser to the former US president Bill Clinton. Gupta was co-founder of the Indian School of Business in Hyderabad.

Gupta also served as special advisor on management reform to then UN secretary-general Kofi Annan.

Gupta's downfall came after his billionaire friend Raj Rajaratnam, a Sri Lankan, was charged by federal prosecutors of perpetrating one of the biggest insider trading scams in US history.

Gupta came to develop a close association with Rajaratnam through another Indian-American McKinsey partner Anil Kumar.

Rajaratnam made an anonymous contribution of a million dollars to the Indian School of Business, Hyderabad, which Gupta had co-founded with Kumar and together they helped start New Silk Route Partners, a private equity firm focused on investments in India.

The two became friends and occasionally lunched together, eating Indian takeout at Rajaratnam's Manhattan office.

In March last year, the US Securities and Exchange Commission filed an administrative civil complaint against Gupta on insider trading charges.

Vigorously denying the SEC accusations Gupta filed a suit against the SEC saying that by bringing administrative charges him, the regulator was denying him the right to have a jury trial.

The complaint was withdrawn by the SEC later but the day federal prosecutors formally brought charges against him in October, the SEC filed fresh insider trading charges against him.

(Also see: Evidence against Gupta ''overwhelming'' prosecutor tells jury)