Hyderabad: Indian-American Rajat Gupta, the former chief of global consulting business McKinsey & Co., has offered to resign as chairman of the Hyderabad-based Indian School of Business (ISB) as he battles allegations of insider trading by the US market regulator, the Securities and Exchange Commission (SEC).

Under scanner: The SEC has accused Gupta of having passed on confidential information on Goldman Sachs and P&G in 2008 and 2009 to hedge fund manager Raj Rajaratnam. Photo by Michael Wuertenberg/Bloomberg

Gupta, 62, “has requested the ISB executive board to relieve him of his board responsibilities till his pending matter with the US SEC is resolved," ISB, ranked among the world’s top 20 business schools by the Financial Times of London, said in a brief statement on Monday.

“This, and the appointment of the new chairman, will be tabled at the upcoming board meeting on April 2nd, 2011," the school said.

The SEC has accused Gupta, who founded ISB in 2001 together with McKinsey & Co. director Anil Kumar, of having passed on confidential information on Goldman Sachs Group Inc. and Procter & Gamble Co. (P&G) in 2008 and 2009 to hedge fund manager Raj Rajaratnam, founder of Galleon Group LLC. According to the SEC, he disclosed information to Rajaratnam about a $5 billion investment in Goldman by Warren Buffet’s Berkshire Hathaway Inc.

The tip-offs generated $18 million in profits or saved losses for Galleon, according to the SEC. Gupta, who has counter-sued the SEC, has denied the charges. He has resigned from the boards of Goldman, P&G and Genpact Ltd, among others.

The SEC allegations against Gupta, an alumnus of the Indian Institute of Technology-Delhi and Harvard Business School, came on top of the resignation last year of Anil Kumar from the board of ISB after he was accused of involvement in the insider trading scandal. He has pleaded guilty.

M. Rammohan Rao resigned as dean of ISB in 2009. He was an independent director of Satyam Computer Services Ltd, which was hit by India’s biggest corporate fraud after founder B. Ramalinga Raju confessed to having misstated accounts to the tune of Rs7,136 crore over a period of several years.

Gupta won’t be attending the 2 April meeting of ISB’s board and the convocation ceremony the same day, said Sriram Gopalakrishnan, director of marketing and communications at the business school. The announcement was the first word on Gupta by ISB since it defended the founder chairman on 2 March, saying it was confident Gupta would be cleared of the charges against him.

“The ISB community is confident that Rajat Gupta will be vindicated," ISB said in that statement.

Gopalakrishnan downplayed some newspaper reports that the ISB had imposed a media gag on members of the board, faculty and students from making public comment on the matter. “It was over-emphasized," he said.

ISB dean Ajit Rangnekar couldn’t be reached for comment on Monday. His office said Rangnekar would be busy in meetings throughout the day.

“Individuals are instrumental in building a brand," said Narayanan Ramaswamy, executive director who oversees the education practice at the consulting firm KPMG Advisory Services Pvt. Ltd, adding that Gupta had done the right thing. “ISB as a brand has been built and the brand will not be impacted adversely. ISB has come of age."