Former Goldman Director Surrenders to FBI (GS)

Rajat Gupta, former director of Goldman Sachs Group Inc. (NYSE: GS), surrendered to the FBI today. Gupta has been accused of providing insider information to hedge fund manager Raj Rajaratnam of Galleon Group LLC.

Gupta, who is 62, is the highest-ranking executive to be arrested in the Galleon insider trading probe. Gupta presented himself to the FBI today in Manhattan, according to J. Peter Donald, a spokesman for the agency.

The insider trading probe at Galleon Group has been going on four years. Following the investigations, Gupta is expected to be charged in a case prosecuted by Preet Bharara, the Manhattan U.S. Attorney, a person familiar with the investigation told Washington Post.

Meanwhile, Gupta’s lawyer, Gary Naftalis defended the former Goldman executive. In an emailed statement on Tuesday, Naftalis said that any allegation that Gupta engaged in any unlawful conduct is totally baseless. Naftalis said that Gupta did not trade in any securities, did not tip Mr. Rajaratnam so he could trade, and did not share in any profits as part of any quid pro quo.

The crackdown on Galleon is the largest on insider trading at hedge funds in U.S. history. Galleon’s founder Rajaratnam was arrested on insider trading charges in October 2009. Earlier this year, he was convicted of securities fraud and conspiracy. On October 13, Rajaratnam was sentenced to a 11-year prison term. There are 50 more people charged in the probe.

However, Rajaratnam told Newsweek in an interview that prosecutors forced him to plead guilty to one criminal charge and inform against Gupta.

Meanwhile, Lloyd Blankfein, CEO of Goldman Sachs, who also testified in the Rajaratnam trial, said that Gupta violated the bank’s policies by telling Rajaratnam about its results and plans.

Gupta was charged by the SEC earlier this year for passing insider information to Rajaratnam about Goldman Sachs and Procter & Gamble (NYSE: PG).The SEC filed an administration action against Gupta in March, however, dropped it in August after Gupta sued the agency for violating his rights by not bringing the case in federal district court.

Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.