Ex-Goldman Sachs director Rajat Gupta surrenders before FBI

Former Goldman Sachs director Rajat Gupta, one of the most prominent Indian-Americans in the country's financial scene, on Wednesday surrendered before federal authorities in New York in connection with a massive insider trading scam.

62-year-old Gupta appeared in Manhattan federal court but it was not immediately known what charges have been slapped against him by the prosecutors.

A report in the New York Times quoted people briefed on the matter as saying that criminal charges would be filed against Gupta.

The report quoted Gary Naftalis, a lawyer for 62-year-old Gupta, who said, "The facts demonstrate that Gupta is an innocent man and that he acted with honesty and integrity."

"The case against Gupta would extend the reach of the government's inquiry into America's most prestigious corporate boardrooms. The charges would also mean a stunning fall from grace of a trusted adviser to political leaders and chief executives of the world's most celebrated companies," it said.

Gupta was the former director of Goldman Sachs and Procter & Gamble and head of McKinsey & Company.

He came under the scanner after prosecutors charged his friend Sri Lanka born hedge fund billionaire Raj Rajaratnam on insider trading charges. Rajaratnam has been sentenced earlier this month to 11 years in prison.

The NYT report said while there is no indication yet that Gupta profited directly from the information he passed to Rajaratnam, securities laws prohibit company insiders from divulging corporate secrets to those who then profit from them.

"The case against Gupta would tie up a major loose end in the long-running investigation of Rajaratnam's hedge fund, the Galleon Group," the report said.

"The legal odyssey leading to charges against Gupta could serve as a case study in law school criminal procedure class."

A native of Kolkata, Gupta had a meteoric rise to corporate success after he graduated from Harvard Business School. He advised business leaders including General Electric's Jeffrey Immelt and Henry Kravis of the private equity firm Kohlberg Kravis Roberts & Company. He had also served as special adviser to the United Nations.

Gupta's name emerged in the insider trading scheme a week before Rajaratnam's trial in March, when the Securities and

Exchange Commission filed an administrative proceeding against him. The agency accused Gupta of passing confidential information about Goldman Sachs and Procter & Gamble to Rajaratnam, who then traded on the information and profited from it.

Authorities said Gupta gave Rajaratnam confidential information of Warren Buffett's five billion dollar investment in Goldman Sachs during the financial crisis. Federal prosecutors had named Gupta a co-conspirator but he was never charged.

During Rajaratnam's trial, Goldman chief executive Lloyd Blankfein testified about Gupta's role on the board and the secrets he was privy to, including earnings details and the bank's strategic deliberations, the report said.

Gupta fought the S.E.C.'s civil action, saying that the proceeding denied him of his constitutional right to a jury trial and treated him differently than the other Rajaratnam-related defendants.

The SEC charges against Gupta were dropped in August, but the regulatory authority said it still has the right to bring an action in federal court. SEC is expected to file a new civil case against Gupta.