Rajat Gupta, a former Goldman Sachs Group Inc director and former global head of McKinsey & Co, was arrested on Wednesday on criminal charges related to his hedge fund manager friend Raj Rajaratnam, the central figure in a U.S. crackdown on insider trading.
Gupta, the most prominent corporate executive to be caught up in the government's wide-ranging insider-trading probe, was identified eight months ago by prosecutors as an unindicted co-conspirator in Rajaratnam's case.
An FBI spokesman said Gupta, 62, surrendered to agents at his home in Connecticut and that he was driven to the New York FBI office, where he was placed under formal arrest at 8:15 a.m. EDT (1:15 p.m. British time).
Gupta will appear in court later in the day on charges related to the Rajaratnam case, FBI spokesman Peter Donald said. Prosecutors said at Rajaratnam's trial that in 2008 Gupta leaked information about Goldman that he learned from the powerful Wall Street bank's board meetings.
A spokesman for Gupta's lawyer, Gary Naftalis, declined immediate comment on his client's arrest.
On Tuesday night, when sources briefed on the case said Gupta would be arrested, Naftalis said in a statement that his client had done nothing wrong.
Any allegation that Rajat Gupta engaged in any unlawful conduct is totally baseless, Naftalis said. The facts demonstrate that Mr. Gupta is an innocent man and that he has always acted with honesty and integrity. He 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.
A New York federal jury convicted Sri Lankan-born Rajaratnam in May after a two-month trial. On October 13, a judge sentenced him to 11 years in prison, the longest recorded for insider trading.
Gupta, 62, is a prominent figure in the South Asian community in the United States after 34 years at elite consulting firm McKinsey & Co. He was head of McKinsey for nine years. In 2006, he won a seat on Goldman's board, but he has since resigned. He retired from McKinsey in 2007.
At Rajaratnam's trial, prosecutors played secretly recorded telephone conversations in which Rajaratnam was heard telling Galleon employees about information he had received from Gupta about Goldman Sachs.
(Reporting by Basil Katz, Grant McCool and Jonathan Stempel in New York, editing by Gerald E. McCormick and Lisa Von Ahn)