Harvard Alum Convicted Of Insider Trading

One of the Harvard Business School’s most prominent alums was found guilty of insider trading today (June 15).

Rajat K. Gupta, the former head of the consulting firm McKinsey & Company and a former Goldman Sachs and Procter & Gamble board member, was found guilty of conspiracy and securities fraud.

After a trial that lasted a month in Federal District Court in Manhattan, the jury reached its verdict after two days of deliberation. It found the high profile executive guilty of leaking confidential information about Goldman to his friend and business associate, Raj Rajaratnam, on three different occasions in 2008. He was also convicted of conspiring in an insider trading scheme with Rajaratnam, a Wharton MBA.

Gupta becomes the third Harvard Business School MBA to be caught in the massive insider trading scandal. Another HBS alum and former Morgan Stanley banker, Adam Smith, plead guilty last year and testified against Rajaratnam. Samir Barai also pleaded guilty last year to conspiracy to commit securities and wire fraud, and obstruction for impeding a federal grand jury probe by destroying evidence. Both Smith and Barai graduated from HBS in 1999. Besides Rajaratnam’s conviction, two other Wharton MBAs also have plead guilty to securities fraud.

Gupta was found not guilty of two instances of tipping Rajaratnam, including an allegation that he divulged secret information on Procter & Gamble.

“Having fallen from respected insider to convicted inside trader, Mr. Gupta has now exchanged the lofty board room for the prospect of a lowly jail cell,” Preet Bharara, the United States attorney in Manhattan said in a statement. “Almost two years ago, we said that insider trading is rampant, and today’s conviction puts that claim into stark relief.”

Gupta’s attorney, Gary Naftalis, said that his client would likely appeal the verdict. “We believe the facts of this demonstrate that Mr. Gupta is innocent and we continue to believe he is innocent of all the charges,” Naftalis told reporters after the verdict. “This is only round one of this matter.”

Gupta’s sentencing is scheduled for Oct. 18. He faces a maximum sentence of 25 years in prison, but will probably serve less time than that. Rajaratnam, the former head of the Galleon Group hedge fund who was convicted of orchestrating a huge insider trading conspiracy last year, is serving an 11-year jail term.