Rajat Gupta was a member of the Goldman Sachs board in 2008 (he has just resigned) when the board discussed on September 21-23 converting Goldman Sachs into a Bank Holding Company and accepting Berkshire Hathawayâ€™s offer of a $5 billion purchase in preferred shares. Telephone records and calendar entries indicate that, on the morning of Monday, September 22, the day after the Sunday evening Goldman Sachs Board meeting, Gupta and Rajaratnam very likely had a telephone conversation. Shortly after that conversation, Rajaratnam had his hedge company, Galleon, which held no pre-existing long or short position in Goldman Sachs securities at the time, to purchase over 80,000 Goldman Sachs shares.
On September 23, Rajaratnam placed a call to Gupta which lasted over 14 minutes. Less than a minute after the call began, Rajaratnam caused the Galleon Tech funds to purchase more than 40,000 additional Goldman Sachs shares.
Gary Naftalis, Mr. Guptaâ€™s lawyer explained, â€œMr. Gupta has done nothing wrong.Â There is no allegation that Mr. Gupta traded in any of these securities or shared in any profits as part of any quid pro quo.â€ Ah, but a director passing along non-public information can be a bit of a problem.