Ex-Goldman Sachs board member indicted in insider-trading case

A former board member of Goldman Sachs and Proctor & Gamble became the most prominent business executive arrested in the biggest insider-trading case in history when a securities fraud indictment was unsealed against him Wednesday.

The indictment accuses Rajat Gupta of cheating the markets with Raj Rajaratnam, the convicted hedge fund founder who was the probe's prime target.

He pleaded not guilty in court Wednesday.

Gupta, 62, of Westport, Connecticut, had quietly surrendered early Wednesday at the FBI's New York City office, located a few blocks north of the ongoing Occupy Wall Street demonstration against corporate greed.

His lawyer called the allegations "totally baseless".

He pleaded not guilty to one count of conspiracy to commit securities fraud and five counts of securities fraud. The charges carry a potential penalty of 105 years in prison.

The indictment unsealed in US 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.

Gupta, who is India-born, is accused of being "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".

Alluding to the wide scope of the prosecution, US Attorney Preet Bharara said in an earlier release: "Today we allege that the corruption we have seen in the trading cubicles, investment firms, law firms, expert consulting firms, medical labs, and corporate suites also insinuated itself into the boardrooms of elite companies."

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.

Gupta's lawyer, Gary P. Naftalis, said in a statement Wednesday that his client only had legitimate communications with Rajaratnam.

"The government's allegations are totally baseless," he said. "The facts in this case demonstrate that Mr Gupta is innocent of any of these charges and that he has always acted with honesty and integrity. ... We are confident that these accusations - which are based entirely on circumstantial evidence - cannot withstand scrutiny and that Mr Gupta will be completely exonerated of any wrongdoing."

Aside from being a former director of the Wall Street powerhouse Goldman Sachs, Gupta is the former chief of McKinsey & Company, a highly regarded global consulting firm that zealously guards its reputation for discretion and integrity.

Gupta was also a former director of the huge consumer products company Procter & Gamble Company, a pillar of American industry and one of the 30 companies that make up the Dow Jones industrial average. P&G owns many well-known brands, including Bounty, Tide, and Pringles.