Rajat Gupta Will Face Criminal Charges for Insider Trading [Updated]

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Rajat Gupta. Photo: Seokyong Lee/Bloomberg via Getty Images

Hedge funder Raj Rajaratnam might be out of the picture for a while, but the FBI's interest in others thought to have participated in his massive Galleon Group insider-trading scheme continues. On Wednesday, Rajat Gupta is expected to turn himself in to the authorities for allegedly providing privileged information to Rajaratnam, which he gained in his roles as a Goldman Sachs board member and former global head of consulting firm McKinsey. Here's what his attorney, Gary Naftalis, has to say:

"Any allegation that Rajat Gupta engaged in any unlawful conduct is totally baseless. The facts demonstrate that Mr. Gupta is an innocent man and that he has always acted with honesty and integrity. 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."

In fact, Naftalis claims Gupta "lost his entire investment [with Rajaratnam] at the time of the events in question, negating any motive to deviate from a lifetime of probity and distinguished service." According to The Wall Street Journal, that last bit obviously might present a problem for prosecutors. However, the government's charges against Gupta are less likely to focus on the strictly tangible effects of insider trading than on the argument that the mixing of the men's social and business lives "is emblematic of the back-scratching that pervades the corporate world and can sometimes veer into insider trading."

Update: As expected, Gupta turned himself in this a.m.

Gupta to Face Criminal Charges [WSJ]
UPDATE 2-Ex-Goldman director to face criminal charges-source [Reuters]