Former Goldman Board Member Charged with Insider Trading

The SEC charged Rajat Gupta, who has also served on the boards of Procter & Gamble and the parent company for American Airlines. Gupta was a guest at President Barack Obama's first state dinner.

Gupta's double-dealing is a portrait of corporate board meetings leading to secret phone calls, to stock-trading orders and finally to huge illicit profits made within hours.

"Prosecutors are going after the biggest heads, and now it has infiltrated the largest brokerage and hedge funds around," said Andrew Stoltmann, a Chicago lawyer who's handled insider-trading cases. "We are seeing the reaches of insider trading at the highest level."

[AP] The SEC alleges that during the height of the financial crisis Gupta passed along privileged financial information that helped enrich the target of the government's sweeping probe.

A pivotal moment came on Sept. 23, 2008. Gupta listened via teleconference as the Goldman Sachs board approved an offer from Warren Buffett's Berkshire Hathaway to invest $5 billion in the banking giant. Seven minutes before the stock markets closed, Gupta hung up the call. He dialed Raj Rajaratnam. The two men spoke briefly.

Seconds later, Rajaratnam directed his hedge fund, the Galleon Group, to buy 175,000 shares of Goldman stock. The next day, he would sell them. His profit: nearly $1 million.

Gupta was an investor in some of the Galleon hedge funds. He also had other business interests with Rajaratnam.