Business leader and Westport resident Rajat Gupta could face hefty fines and exclusion from company boards should the insider trading charges against him be upheld.
Gupta, 62, was charged March 1 by Securities and Exchange Commission investigators with tipping off friend and business associate Raj Rajaratnam with confidential board information about Goldman Sachs and Procter & Gamble.
John Nester, a spokesman for the SEC in Washington, said that the main penalties in an insider trading case are disgorgement, or the paying back or any illicit gains, a financial penalty of up to three times the disgorgement amount, and a bar from being a company officer or director.
A lawyer for Gupta said in a statement the charges are ``totally baseless.’’
Gupta’s associate Rajaratnam, the wealthy founder of the Galleon hedge fund group, goes on trial in New York on March 8 for a widespread insider trading scheme. He was arrested in October 2009.
Gupta, who lives on Beachside Avenue, does not currently face criminal charges.
Gupta is the biggest name associated with the Galleon case. As well as serving on the boards of Goldman and Procter & Gamble, he was managing director of consulting giant McKinsey for nine years. He was a special advisor at the United Nations and currently serves on the Bill & Melinda Gates Foundation, among other high-profile commitments.
The SEC’s case gives precise details of a flurry telephone calls between Gupta and Rajaratnam, during which Gupta allegedly gave away nonpublic information about the companies. Rajaratnam, according to the SEC, traded on the information and generated profits and "loss avoidance" of $18 million. Gupta was at the time invested in some Galleon funds.
One conversation, giving a nod to upcoming better-than-expected Goldman results for second-quarter 2008, netted Galleon trading profits of $13.6 million, the SEC’s Division of Enforcement alleges.
The SEC has ordered that Gupta, who holds a Harvard MBA, respond to the allegations within 20 days. A date for the public hearing has not yet been set, but will be held between 30 and 60 days after the charges were laid out March 1.