April 16, 2012 / 6:05 PM / 7 years ago

US adds new insider trading allegation against ex-Goldman director

NEW YORK, April 16 (Reuters) - U.S. prosecutors have added a new insider trading allegation against Rajat Gupta, a former director of Goldman Sachs Group Inc and Procter & Gamble Co charged with illegally tipping his former friend Raj Rajaratnam, the convicted founder of Galleon Group hedge fund.

Prosecutors said in a letter to U.S. District Judge Jed Rakoff made public on Monday that Gupta tipped Rajaratnam “relating to P&G’s organic sales growth forecast for the October-December quarter prior to P&G’s public announcement on or about Dec. 11, 2008.”

They said this allegation was based on information received on April 5 in Galleon documents.

Gupta was indicted in October and he is the highest-ranking executive charged in a broad U.S. crackdown on insider trading at hedge funds. He is charged with five counts of securities fraud and one count of conspiracy. He could face up to 25 years in prison if convicted of securities fraud.

He has denied all charges against him, and is scheduled to go on trial on May 21.

Rajaratnam is serving an 11-year prison sentence after being convicted by a jury at trial last year on evidence largely based on unprecedented wiretaps.

Prosecutors may not add allegations unless new information comes to light. In their letter, which is dated April 9 and filed in Manhattan federal court, prosecutors suggested that more allegations against Gupta might be forthcoming.

“The government ... is waiting for outstanding requests for information from a number of third-parties,” the letter said. “For example, the government is waiting for information relating to P&G’s public announcement of its earnings on or about Jan. 31, 2008.”

Gupta, a former head of the McKinsey & Co, is accused of providing inside tips about Goldman Sachs and Procter & Gamble board meetings to Rajaratnam in 2007 and 2008.

In a statement, his lawyers said that “newly added charges — like the ones brought last year — are not based on any direct evidence, but rely on supposed circumstantial evidence.”

Prosecutors previously said Gupta participated from Galleon’s offices in a Goldman conference call in March 2007, which discussed better-than-expected quarterly results that had yet to be released. Rajaratnam bought Goldman stock 25 minutes after the call ended, prosecutors said.

Investigators recorded at least two discussions between Rajaratnam and Gupta.

The indictment said Gupta gave Rajaratnam advance knowledge of a $5 billion investment in Goldman by Warren Buffett’s Berkshire Hathaway Inc at the height of the 2008 financial crisis, Goldman’s surprise fourth-quarter 2008 loss, and P&G’s quarterly earnings in late January 2009.

The case is USA v Gupta, U.S. District Court for the Southern District of New York, No. 11-907.

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