Rajat Gupta

Washington, March 1 (Agencies): Rajat Gupta, one of the first Indians to breach the corporate glass ceiling in America and who traces his roots to Calcutta, has been charged with insider trading in the US.

American federal regulators have said the former Goldman Sachs board member provided confidential information to the central figure in a sweeping hedge fund probe.

The US Securities and Exchange Commission (SEC) announced the civil charges against Gupta today. The agency said Gupta told Raj Rajaratnam, the founder of the Galleon Group hedge fund, that Warren Buffett’s Berkshire Hathaway planned to invest $5 billion in Goldman before it was publicly announced in September 2008, at the height of the financial crisis.

Gupta, an alumnus of IIT and Harvard Business School, is a former worldwide managing director of consultants McKinsey, the first person born outside the US to hold the coveted position.

Gupta is also charged with giving Rajaratnam confidential quarterly earnings information from Goldman and Procter & Gamble (P&G). Gupta served as a board member at Goldman from 2006 until last May. He was board member at P&G until voluntarily resigning on Tuesday, after the charges were announced.

“Gupta was honoured with the highest trust of leading public companies, and he betrayed that trust by disclosing their most sensitive and valuable secrets,” SEC enforcement chief Robert Khuzami said in a statement.

The 62-year-old Gupta is one of the highest-ranking officials implicated in the US government’s wide-ranging insider trading probe.

Gupta was an investor in some of the Galleon hedge funds when he passed the information along, and he had other business interests with Rajaratnam that were potentially lucrative, the SEC said. Rajaratnam used the information from Gupta to illegally profit in hedge fund trades, the SEC said.

The information on Goldman made Rajaratnam’s funds $17 million richer, the SEC said. The P&G data created illegal profits of more than $570,000 for Galleon funds managed by others, the SEC said.

Gupta “has vigorously denied the SEC accusations that are being levelled at him and is stepping down in the interests of the company, to prevent any distraction to the P&G board and our business,” Paul Fox, P&G spokesperson in Cincinnati, said.

Gupta’s attorney, Gary Naftalis, wasn’t immediately available for comment.

Rajaratnam, a one-time billionaire who is free on $100-million bail, is scheduled to go on trial next week in a probe that has resulted in criminal charges against more than 25 people. Of those, 19 have already pleaded guilty to charges with the majority of them co-operating.

“Prosecutors are going after the biggest heads and now it has infiltrated the largest brokerage and hedge funds around,” said Andrew Stoltmann, a Chicago securities attorney who has handled insider trading cases. “We are seeing the reaches of insider trading at the highest level.”

The case against Gupta will be heard by an administrative law judge at the SEC. That proceeding will determine whether he should pay restitution and civil fines and if he should be barred from serving as an officer or director of a public company, the SEC said.