Genpact Chairman Accused of Insider Trading
The chairman of Bermuda-registered global outsourcing giant Genpact has been accused of insider trading by the US Securities and Exchange Commission.
The SEC said yesterday [Mar. 1] that former Goldman Sachs director Rajat Gupta, 62, used his corporate board positions to supply confidential information to a hedge fund manager who is set to go on trial in the US next week on insider trading charges.
In one instance, the SEC said, Mr. Gupta [pictured] allegedly tipped off Raj Rajaratnam minutes after the board of Goldman Sachs Group Inc. approved a $5-billion investment by Warren Buffett in the Wall Street firm at the height of the financial crisis — enabling Mr. Rajaratnam’s Galleon hedge funds to make a quick $900,000 profit.
In all, the SEC said, information provided by Mr. Gupta — allegedly including sneak peeks of financial results at Goldman and Procter & Gamble Co. — generated more than $18 million in illicit gains, including losses avoided.
The SEC’s allegations appear to be the first such accusations against a Goldman Sachs director for work done while on the bank’s board. Long the premier investment bank on Wall Street, Goldman Sachs has been under intense public scrutiny in recent years because of its success in turning a profit during the financial crisis — sometimes at the expense of clients.
Mr. Gupta’s lawyer dismissed the SEC allegations as ”totally baseless,” noting his client is not accused of receiving anything in exchange for information provided.
“Mr. Gupta has done nothing wrong and is confident that these unfounded allegations will be rejected by any fair and impartial fact finder,” the lawyer said.
The SEC, however, said Gupta “stood to benefit from his relationship with Mr. Rajaratnam” and was an investor in Galleon funds at the time of the alleged misconduct in the summer and fall of 2008.
The Indian-American businessman spent 34 years at McKinsey, one of the leading corporate consulting companies in the world. In 1994, he was elected head of McKinsey, a position he held for nine years.
Under his tenure, McKinsey grew into a global powerhouse, opening at least 20 offices overseas and more than doubling the number of consultants employed, McDonald writes.
After he left McKinsey, Mr. Gupta was appointed to the boards of a number of well-known public companies including Bermuda-registered, India-based Genpact.
The SEC’s action, which could result in fines against Mr. Gupta and an order that he step down from his board seats.
Mr. Gupta gave up his post on Goldman’s board last May after being alerted that the SEC was investigating him. But the businessman remains remains on the boards of American Airlines and its parent company, AMR Corp, as well as audio system maker Harman International Industries Inc. and Genpact Ltd.
Genpact, which has no physical presence in Bermuda, issued a statement saying Mr. Gupta “has made invaluable contributions to Genpact, and has always sought to hold Genpact to the highest standards of integrity and corporate governance.”
