Rajat Gupta, a former Goldman Sachs Group director, was indicted Wednesday by a federal grand jury on charges of conspiracy and securities fraud, making him the highest-ranking executive charged in a nationwide crackdown on insider trading centered on Raj Rajaratnam, co-founder of hedge fund Galleon Group.
Mr. Gupta, who also sat on the board of Procter & Gamble, was charged with five counts of securities fraud and one count of conspiracy to commit securities fraud in an indictment unsealed Wednesday in U.S. District Court in New York. He pleaded not guilty to the charges.
Also on Wednesday, Mr. Gupta was named in a federal complaint by the Securities and Exchange Commission over related civil claims.
“Gupta was honored with the highest trust of leading public companies, and he betrayed that trust by disclosing their most sensitive and valuable secrets to the disadvantage of investors, shareholders and fellow directors,” SEC Enforcement Director Robert Khuzami said in a statement.
“From 2008 through January 2009, Gupta disclosed to Raj Rajaratnam material, non-public information that Gupta had learned in his capacity as a member of the boards of directors of Goldman Sachs and P&G with the understanding that Rajaratnam would use the inside information to purchase and sell securities,” the U.S. said in the indictment.
The FBI and U.S prosecutors have spent four years probing illegal trading at hedge funds, technology firms, banks and consulting firms. Earlier Wednesday, Mr. Gupta gave himself up to federal authorities in Manhattan.
Mr. Rajaratnam on Oct. 13 was sentenced to 11 years in prison, the longest sentence for insider trading in U.S. history. Mr. Gupta faces as long as five years in prison if convicted of the conspiracy charge and as long as 20 years in prison if convicted on each of the securities fraud charges.
“Any allegation that Rajat Gupta engaged in any unlawful conduct is totally baseless,” his lawyer, Gary Naftalis, said in an e-mailed statement Tuesday. “He did not trade in any securities, did not tip Mr. Rajaratnam so he could trade, and did not share in any profits as part of any quid pro quo.”