The sprawling insider trading investigation has now reached in the boardroom of Goldman Sachs (NYSE: GS), the most prestigious bank on Wall Street. The SEC has charged Rajat Gupta, who served on Goldman's board from November 2006 to May 2010, with passing material inside information to Raj Rajaratnam, who then traded on that information.

Specifically, the information was about Warren Buffet's big $5 billion investment in Goldman just before it was announced. The SEC said Gupta was a direct or indirect investor in some of the Galleon hedge funds at the time of the tips. Gupta, 62, also passed information on quarterly earnings at Goldman Sachs and Procter & Gamble, at which he also was a director.

All told, Rajaratnam made more than $18 million on insider information from Gupta, according to the complaint.

The SEC documented a trail of phone calls between Gupta and Rajaratnam about Goldman. For example, Gupta was said to have dialed into a board meeting on October 23, 2008, and remained on the call until 4:49 p.m. Twenty-three seconds after hanging up, Gupta called Rajaratnam. The next morning, Galleon sold Goldman stock.

Gupta's lawyer says he is innocent of all charges, and in fact lost $10 million in Galleon funds.

Still, this is quite a fall for a man "regarded as one of the great success stories at McKinsey, the elite management consultancy he led for almost a decade," notes the Financial Times. "Born to a middle-class family in Maniktala, Calcutta, Mr. Gupta joined McKinsey in 1973 from Harvard Business School. After a 21-year rise, he was elected as managing director in 1994, the first Indian to head a global company." 

For more:
- here's a Reuters account
- here's the FT article

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