Securities and Exchange Commission of the USA (SEC) brought charges against a former managing director of McKinsey and a member of the Board of Directors of the Savings Bank - Rajat Gupta. According to the SEC, Gupta used to serve on the boards of directors of Goldman Sachs and Procter & Gamble (P & G), and reported information on those companies to the founder of hedge fund Galleon Raj Rajaratnam, who was arrested in October 2009


A week after the collapse of Lehman Brothers, on September, 21 and 23 2008, Gupta participated in two conference calls during which the board of directors Goldman discussed the prospects of the bank and the intention of Berkshire Hathaway Warren Buffett to invest $ 5 billion in Goldman. A deal with Berkshire was announced on September 23 after the close of trading (on the NYSE - at 16.00). Gupta participated in the conference until 15.53. After hanging up, he dialed the phone of Rajaratnam. At 15.56 and 15.57, at the direction of Rajaratnam, Galleon Funds purchased 175,000 shares of Goldman, in addition to 120,000, that they had bought the day before. On September, 24 Galleon sold shares of the bank which had risen in price by 6,4%, thus it earned $ 900,000.

December 16, 2008 Goldman reported a quarterly loss –it was the only one since 1999, when it became public. The Goldman CEO, Lloyd Blankfein informed the directors about the negative financial result yet on October, 23 - at the time loss per share was $ 1.96. Gupta listened to the conference till 16.49, after 23 seconds he called Rajaratnam and talked to him for 13 minutes. The next morning after the opening trades Galleon began to sell shares of the bank. The same day, Gupta mentioned in conversation with another participant in the scheme, whose name was not disclosed in the lawsuit, that although the market expects Goldman to have $ 2,5 of revenue per share, in fact, it was going to receive approximately $ 2 of loss. Due to having time to sell shares of Goldman, Galleon avoided losses on $ 3 million

Information on the outcome of Goldman in the II quarter of 2008 turned out to be the most profitable; Galleon earned 13.6 $ million. Fiscal quarter of 2008 ended on May 30 at Goldman. A week before the official announcement of the results, Blankfein called Gupta and told him the results of the bank. That evening he rang round all the directors of Goldman - it was his usual practice. Later in the evening Gupta repeatedly called Rajaratnam.

The next morning, immediately after the opening of trading, Galleon began buying stock options in Goldman and shares themselves. Some of them were sold on June 16 after the bank reported earnings forecast, and the rest - on June 17, when Goldman reported for the quarter.

January 29, 2009, the day before the publication of quarterly reports P & G, Gupta participated in a teleconference of the audit committee of the company, to which he belonged. The day before he received an e-mail with the preliminary results for the quarter according to which the comparable sales of P & G for the year would grow by 2-5%, not 4-6% as it had been predicted earlier. The same day, Galleon sold 180,000 shares of the company to avoid loss of $ 570,000.

In general, the illegal income of hedge fund due to information provided by Gupta, amounted to about $ 18 million

Gupta did not do anything illegal, his lawyer Gary Naftalis said, because he received no income from these transactions.

On Tuesday, the same day when the SEC brought charges against him, Gupta "voluntarily resigned" the post of P & G Director, spokesman for the company claimed. According to him, Gupta resigned in interest of the company to avoid attracting too much attention to the board of directors of P & G and its business. Goldman does not comment on the claim by SEC. Gupta was a member of the board of directors of the bank from November 2006 to May 2010. During this period he also was a member of the audit and compensation committees of the bank, as well as the Corporate Governance Committee, according to the document by SEC. In 2010, he did not submit a nomination to the Board of Directors of Goldman, but in April it became known about his possible involvement in the insider scandal around Galleon.

If the fault of Gupta is proved, he will have to pay a fine of illegally obtained income and he will be unable to hold executive positions in public companies.

Gupta is staying in an international board of trustees of the Moscow School of Management called “Skolkovo”, a source from the school said. He found it difficult to clarify whether there is any special decision in connection with the presentation of charges against Gupta.