Gupta Jailed for Fraud

Rajat Gupta, a former director at Goldman Sachs (NYSE:GS), was sentenced on Wednesday afternoon for his role in an insider trading fiasco. Gupta has been convicted by a jury on three counts of securities fraud and one count of conspiracy. The jury found that he passed confidential information from Goldman Sachs to his friend and former business associate Raj Rajaratnam, a founder of the Galleon Group hedge fund.

For his part, Gupta has been sentenced to 24 months in federal prison, and a $5 million fine. His prison sentence is set to begin on January 4, 2013.

Rajaratnam began serving an 11-year sentence in December for his role in the scheme. Gupta faced a maximum prison term of up to 25 years, 20 for securities fraud and 5 for conspiracy. The government recommended sentencing between 97 and 121 months, while Gupta’s defense proposed alternative punishment such as community service. Mitigating factors included his history of philanthropy, and high-profile figures such as Bill Gates and Kofi Annan asked the judge — U.S. District Judge Jed Rakoff — to be lenient in his sentencing. The argument ran that it would be a crime in and of itself to send Gupta to jail when he could be helping the world.

Catalysts are critical to discovering winning stocks. Check out our newest CHEAT SHEET stock picks now.

Weighing against him was that fact that within one minute of ending a board call in September, 2008, where a $5 billion investment in Goldman by Warren Buffet was approved, Gupta called Rajaratnam, who then told his traders to buy as much as $40 million worth of stock in the bank. Many people have spoken on behalf of Gupta’s commitment to helping others, but perhaps he was a little too committed to Rajaratnam.

Gupta was previously the managing director of McKinsey & Company, and has served on the boards of Procter & Gamble (NYSE:PG) and American Airlines.

According to the Associated Pressgovernment prosecutors wrote that Gupta’s crime “understandably fuels cynicism among the investing public that Wall Street is rigged and that Wall Street professionals unfairly exploit privileged access to information. This is particularly troubling at a time when there is widespread concern about corruption, greed, and recklessness at the highest levels of the financial services industry.”

Rakoff, for his part, has something of a history of issuing jail sentences that are shorter than recommended for insider trading. The sentence does fall way short of the recommended time, indicating that some 400 letters of support sent in on his behalf helped soften the judge.

Don’t Miss: These Companies Know Exactly When to Restock Shelves.