Former top Wall Street player denies insider trading

Associated Press

NEW YORK

A former board member of Goldman Sachs and Procter & Gamble pleaded not guilty Wednesday to federal charges accusing him of acting as “the illegal eyes and ears in the boardroom” for a friend, a billionaire hedge-fund founder sentenced this month to 11 years in prison in the biggest insider-trading case in history.

The case, built partially on wiretaps used for the first time in insider trading, has offered unprecedented insight into greed at the highest levels of Wall Street. The arrest of Rajat Gupta took it one step higher.

The indictment unsealed Wednesday accuses Gupta of cheating the markets with Raj Rajaratnam, the 54-year-old convicted hedge-fund founder who was the probe’s prime target.

Gupta, 62, quietly surrendered early in the day at the FBI’s New York City office, a few blocks north of the ongoing Occupy Wall Street demonstration against what protesters call a culture of corporate greed. His lawyer called the allegations “totally baseless.”

Swarmed by photographers, Gupta left the courthouse shortly before 4 p.m.

Gupta, of Westport, Conn., pleaded not guilty to one count of conspiracy to commit securities fraud and five counts of securities fraud, charges that carry a potential penalty of 105 years in prison. He was freed on $10 million bail, and conditions require him to remain in the continental United States. An April 9 trial date was set.

The indictment in U.S. District Court in Manhattan alleges Gupta shared confidential information about both Goldman Sachs and Procter & Gamble at the height of the financial crisis from 2008 through January 2009, knowing that Rajaratnam would use the secrets to buy and sell stock ahead of public announcements.

In a release, U.S. Attorney Preet Bharara said Gupta broke the trust of some of the nation’s top public companies and “became the illegal eyes and ears in the boardroom for his friend and business associate, Raj Rajaratnam, who reaped enormous profits from Mr. Gupta’s breach of duty.”

In all, 56 people have been charged in insider-trading cases since Bharara took over shortly before Rajaratanam’s October 2009 arrest. Of those, 51 have been convicted and 21 sentenced to prison terms ranging from no prison time to 11 years.