New allegation of insider trading against Rajat Gupta

New York: US prosecutors have added a new allegation of insider trading against India-born former Goldman Sachs director Rajat Gupta, who will face trial in May on charges of passing confidential information to convicted hedge fund founder Raj Rajaratnam.

In an 9 April letter to judge Jed Rakoff of the Southern District of New York, made public on Monday, the prosecutors said they have informed Gupta’s lawyers of a “new tip” about consumer goods major Proctor and Gamble’s organic sales forecast that he allegedly passed on to Rajaratnam in 2008. The government has added in its Bill of Particulars information which alleges that “Gupta disclosed to Rajaratnam, and their known and unknown co-conspirators, material, non-public information relating to P&G’s organic sales growth forecast for the October-December quarter prior to P&G’s public announcement on or about December 11, 2008.”

In the indictment filed against Gupta last year, prosecutors had charged that in January 2009 Gupta passed on information to Rajaratnam over phone about P&G’s forecast for its organic sales growth for the fiscal year as well as its earnings release planned for the next day.

Prosecutors said they received the new information through instant messages and emails contained in a hard drive that was submitted to them on 5 April. They reviewed these instant messages and emails before determining they should be added to the allegation against Gupta. The government said it understands that it cannot amend the Bill of Particulars with new allegations for strategic reasons, and any amendments must be for “something that was genuinely not identified at the time.”

Prosecutors told the judge that they are waiting for outstanding requests for information from a number of third-parties for details relating to P&G’s public announcement of its earnings on or about 31 January 2008. They said if the government receives additional information that warrants a new allegation of a tip in the insider trading conspiracy, it will promptly notify the defence and not wait for the deadline of three weeks prior to trial for any further amendments to the Bill of Particulars.

“Although the government believes that there is evidence of additional tips from Gupta to Rajaratnam in furtherance of the charged conspiracy, the government does not intend at this time to offer evidence of such tips in its case-in-chief,” the prosecutors said in the filing.

Gupta, who has pleaded not guilty to the charges of insider trading, will go on trial on 21 May in federal court here. Sri Lankan-origin Rajaratnam was convicted last May of running the massive insider trading scheme and is currently in prison serving his 11-year sentence.