(Reuters) – Rajat Gupta, former global head of McKinsey & Co, is set to go on trial on Monday in New York on charges he leaked confidential information while serving on the board of directors of Goldman Sachs Group Inc and Procter & Gamble Co in 2007 and 2008.
U.S. prosecutors charged Gupta with securities fraud and being part of a conspiracy by tipping his then friend and business associate, Galleon Group hedge fund founder Raj Rajaratnam. The charges carry a possible maximum of 25 years in prison if he is convicted.
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Gupta denies wrongdoing and is fighting the allegations.
Here is a look at the prosecution’s allegations.
* Phone records show that on March 12, 2007, Gupta called into a meeting of the Goldman Sachs board audit committee from Galleon’s offices. Minutes after the phone call ended, prosecutors say, Gupta told Rajaratnam about Goldman’s first quarter 2007 earnings. Galleon’s records show it traded on the information, which was not made public until the next day.
* At the height of the financial crisis on September 23, 2008, Gupta called Rajaratnam 16 seconds after a special Goldman board conference call that approved a $5 billion investment by Warren Buffet’s Berkshire Hathaway, according to phone records in government evidence. At 3:58 p.m., just two minutes before the stock market closed, Galleon traded on the information, which was not made public until after the 4 p.m. market close.
* Gupta had confidential information on October 23, 2008, that Goldman was going to report its first quarterly loss ever as a public company, and he told Rajaratnam. According to phone records, Gupta made the call 23 seconds after the end of a Goldman board telephone meeting at which the participants heard the firm was at that point losing $2 per share.
* Phone records and trading records show Gupta gave Rajaratnam non-public information about Procter & Gamble. This included the sale of P&G;’s Folgers coffee unit to J.M. Smucker Co for $3 billion before the June 4, 2008, public announcement and quarterly earnings in January 2009.
Gupta’s defense lawyers contend that the government has a weak circumstantial case. They say that while there are records of Gupta’s phone connecting with Rajaratnam’s phone, there is no direct evidence of conversations including confidential board information. Gupta’s defense also argues that other people at Goldman could have tipped Galleon and that Gupta won no benefit from the relationship because he lost all $10 million invested in a joint fund with Rajaratnam.
The case is USA v Gupta, U.S. District Court for the Southern District of New York, No. 11-907
(Reporting By Grant McCool; Editing by Will Dunham)