Ex-Goldman director Gupta guilty of securities fraud

Corporate blue blood Rajat Gupta on Friday became the most prominent target to fall in the government's war on insider trading when a Manhattan federal jury found him guilty of three counts of securities fraud and one count of conspiracy.

Gupta, 63, a former chief executive of McKinsey & Co. and director at Goldman Sachs Group and Proctor & Gamble Co. whose net worth exceeded $80 million, now faces up to 65 years in prison for passing tips to friend Raj Rajaratnam, the hedge fund billionaire convicted last year.

The Gupta verdict marked the 62nd conviction in the insider trading probe by the FBI and the office of U.S. Attorney Preet Bharara that began in 2009 and suggested that illegal practices were not only widespread but reached into the upper echelons of corporate America.

"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," Bharara said.

No informants or wiretaps implicated Gupta directly, but prosecutors made out a strong circumstantial case. In one instance in 2008, for example, Gupta's phone was used to call Rajaratnam one minute after Goldman told its directors that Warren Buffett was taking a $5 billion stake in the investment bank.

Rajaratnam then ordered his traders to buy more than $43 million in Goldman stock in the final few minutes of trading. His Galleon Group made more than $1 million on the trade.

Two jurors who spoke to reporters said they wanted to let Gupta walk free because they admired his rise from an orphaned childhood in India to the pinnacle of success, but found the evidence too powerful.

"Here's a man who came to this country and was wonderful example of the American Dream and lived a storybook life," said juror Rick Lepkowski, 53, of Ossining. "I wanted to believe the allegations weren't true but at the end of the day the evidence was overwhelming."

They said they struggled with the motives of a man who was already a multimillionaire, and ended up concluding that Rajaratnam, a Sri Lankan, played a big role in "manipulating" his friendship and cultural ties with Gupta.

"I'm not saying greed wasn't part of it," said juror Ronnie Sesso, 53, of New York City. "But Mr. Rajaratnam made it easy for Mr. Gupta to break the law."

Gupta, of Westport, Conn., was acquitted on two counts of securities fraud, including the only count charging that he passed inside information from Proctor & Gamble. His lawyer said he plans to appeal.

His sentencing was set for Oct. 18. Rajaratnam is serving an 11-year sentence.