Ex-Business Titan Rajat Gupta Guilty of Insider Trading

Rajat Gupta, former Goldman Sachs board memberBy Grant McCool and Basil Katz

NEW YORK -- Rajat Gupta, a consummate business insider who once sat on the board of Goldman Sachs Group, was convicted on Friday of leaking secrets about the investment bank at the height of the financial crisis, a major victory for prosecutors seeking to root out insider trading on Wall Street.

The Manhattan federal court jury delivered its verdict on its second day of deliberations, finding that Gupta had fed stock tips to his hedge fund manager friend Raj Rajaratnam, which he had gleaned from confidential Goldman board meetings.

Gupta is also a former director at Procter & Gamble and a former executive at the elite business consulting firm McKinsey & Co. He is the most prominent person convicted in the government's crackdown in the last few years on illicit trading involving hedge funds and financial consultants.

The 63-year-old Gupta was found guilty of three counts of securities fraud and one count of conspiracy. The jury acquitted him on two other securities fraud charges.

He could receive up to 25 years in prison. The maximum sentence for securities fraud is 20 years and the maximum sentence for conspiracy is five years, though it seems unlikely that he would receive such a heavy punishment. Rajaratnam was convicted of 14 counts of securities fraud and conspiracy last year and is serving an 11-year prison term.

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After the verdict, an ashen-faced Gupta glanced grimly back at his wife and four daughters in the courtroom. Later, the family stood hugging each other in the courtroom as Gupta tried to console his distraught daughters.

His defense lawyer, Gary Naftalis, said Gupta is likely to appeal.

Since being implicated in the Rajaratnam case more than a year ago, Gupta has denied the charges. In addition to his business background, the Indian-born Gupta was known for his work with philanthropies fighting AIDS, malaria and tuberculosis in developing countries.

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After the verdict, jury foreman Rick Lepkowski said he was impressed by Gupta's life story and the support he received from his family, who regularly sat in the front row of the courtroom during the trial.

"I wanted to believe the allegations weren't true," said Lepkowski, a nonprofit group executive from Ossining, New York. "At the end of the day, when all of the evidence was in, it was in my opinion, overwhelming."

Among the most dramatic contentions against Gupta was prosecutors' charge that he had told Rajaratnam about a crucial $5 billion injection into Goldman by Warren Buffett's Berkshire Hathaway at the height of the financial crisis.

Your 7-Step Financial Tune-up Agenda
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Ex-Business Titan Rajat Gupta Guilty of Insider Trading

The goal of this six-month checkup is to identify potential trouble spots before they become big money gushers. Use this checklist to methodically review each area of your personal financial empire. Beneath each step, note any lingering "to-dos" (e.g., "contribute to Roth IRA"). If you cannot complete those items during your financial physical, set a personal deadline for doing so. As an added incentive, come up with a reward you'll indulge yourself with when you've finished.

This will take about 15 to 20 minutes -- less if you already use money tracking software or a site like Mint.com. Simply record the balances of the following items: checking/savings accounts; brokerage accounts; retirement accounts; home equity; short-term debt (credit cards, student/auto loans); and long-term debt (mortgage).

Note what direction your money's going (up, down, haywire). If this is your first review, you now have a baseline for your next checkup.

If you earn a steady paycheck (meaning one not dependent on bonuses or fluctuating earnings month-to-month), this is your chance to stop overpaying Uncle Sam. If you got a tax refund last year of more than $1,000 and have made no adjustments to your W-4, and if you don't anticipate any major life changes, adjust the number of withholding allowances.

Head to IRS.gov's withholding calculator. (You'll need your most recent pay stub and last year's income tax return.) To avoid underpayment penalties, shoot for the number of allowances that satisfies 100% to 110% of the taxes you owed for the prior year.

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Check your contribution levels and the balances on your 401(k), 403(b) or any similar plan, as well as on any profit sharing. At the rate you're going, will you max out your contributions before the first strains of "Auld Lang Syne" on Dec. 31?

The 2012 contribution limit for most folks is $17,000, not including any matching contributions your boss kicks in. If you're 50 or older, your contribution limit is $22,500.

If you signed up for a flexible spending account at work for medical and/or dependent care, gather those bills and fill out the reimbursement forms. Then, project the next six months of spending with what remains so that you're sure to drain the account down to $0, since some plans don't allow carry-forwards on unspent money.

It's also time to think about an IRA. If you haven't devoted any money to one yet, start automating this pay-yourself-big-time-in-the-future account and put it out of your mind. You have until the tax due date next April to fund it for 2012. The maximum contribution limit for this year is $5,000 ($6,000 if you're 50 or older). Even if you can't squirrel away that much cash for the next six months, sock away something. Trust me; you'll thank me in retirement.

Also, evaluate your portfolio's holdings (a great excuse to set up online tracking if you haven't already) and reassess each position using what investing luminary Peter Lynch calls the "two-minute drill" -- that is, listing the reasons you bought the shares, and noting any current red flags on the fundamentals.

Make sure nothing fishy is going on in your credit report. You're entitled to one free credit report each year from each of three major credit reporting bureaus. Go to annualcreditreport.com to get your freebies. (Follow these tips for keeping the bad guys out of your business.) And if you've got major borrowing plans on the horizon, don't wait until the last minute to clean up your credit profile. Give yourself at least three to six months leeway. (Here's a 60-second guide to help you boost your credit score.)

There's a lot you can do right now to improve your future. Put each action step on a calendar (in pen!) and vow to complete each item in the next month. Six months from now you'll be pleasantly surprised at the progress you've made.

Part of the prosecution's evidence was that within a minute of disconnecting from a Sept. 23, 2008 board call approving the investment, Gupta called Rajaratnam at his Galleon Group office in New York. Rajaratnam then hurriedly ordered his traders to buy as much as $40 million in Goldman stock because only minutes remained before the market closed.

At trial, Gupta's lawyers argued that prosecutors "had no real, hard, direct evidence" against Gupta, who did not take the witness stand.

U.S. District Judge Jed Rakoff has set sentencing for Oct. 18.

The case is USA v Gupta, U.S. District Court for the Southern District of New York, No. 11-907.

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