Business

SEC: ex-Goldman big in Buffett deal leak

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A former Goldman Sachs director with powerful business ties leaked word of Warren Buffett’s planned $5 billion infusion in the Wall Street bank less than a minute after Goldman’s board approved the deal, authorities said.

While he was still on the board, Rajat Gupta, the most high-profile executive to be charged in an alleged insider-trading ring, called Galleon Group founder Raj Rajaratnam with the illegal tip just minutes before the stock markets closed, officials said.

The tip earned Rajaratnam’s hedge fund a whopping $17 million, according to the Securities and Exchange Commission complaint filed yesterday against Gupta, a former top executive at consulting firm McKinsey & Co. who served on a number of blue-chip corporate boards.

The SEC’s civil complaint says Gupta, who resigned from Goldman’s board last year after he emerged as a suspect in the insider-trading case against Rajaratnam, repeatedly used his business clout and connections to help Rajaratnam earn money through illegal trading.

Beyond Buffett’s investment — which was widely heralded as a huge vote of confidence in Goldman in the aftermath of Lehman Brothers’ collapse — Gupta allegedly passed along confidential information about earnings at Goldman and Procter & Gamble, where he also served on the board. He resigned from P&G’s board shortly after the charges were made public yesterday.

Gupta was an investor in one of Galleon’s funds and friendly with Rajaratnam, whom, according to sources, he met in 2006 through projects tied to improving India’s infrastructure.

Rajaratnam, who is battling criminal charges, is set to go on trial next week in an insider-trading case that has nabbed dozens of traders, researchers and consultants. Gupta has not been charged with wrongdoing in the criminal probe.

The SEC’s civil complaint is based on a series of phone calls between Gupta, Rajaratnam and fellow directors and executives Gupta talked to about board business.

For example, on Sept. 23, 2008, Gupta listened in to a conference with Goldman directors at 3:15 p.m. to approve Buffett’s $5 billion investment proposal. Gupta got off the call at around 3:53 p.m., the SEC said.

“Within a minute after this telephone conversation, at 3:56 p.m. and 3:57 p.m.,” Rajaratnam purchased more than 175,000 more shares of Goldman’s stock, resulting in the $17 million in ill-gotten gains, the SEC said.

After the news was made public, Goldman shares surged in after hours trading, opening the next day $3.39 higher to $128.44. The stock added another $4.56 to close that day at $133 a share.

Gupta’s lawyer, Gary Naftalis, called the SEC’s allegations “totally baseless.”

Rajaratnam’s lawyer, John Dowd, said: “There is absolutely no merit to it. This is simply an effort to destroy a favorable witness. There is no case, absolutely none. No conversations, no benefit, no nothing. These are old friends and Mr. Gupta is a distinguished human being.”

kwhitehouse@nypost.com

–With Mark DeCambre