Riches to Rajs

1 March 2011 By Jeffrey Goldfarb Follow @jgfarb

What started in the dark underbelly of the hedge fund world just burst into bluechip America. SEC allegations against Rajat Gupta drag Goldman Sachs, P&G, McKinsey, American Airlines and even Harvard into the mud. Confidence in U.S. boards just suffered a massive blow.

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The Securities and Exchange Commission announced insider trading charges on March 1 against Rajat Gupta, who has served on the boards of directors at Goldman Sachs, Procter & Gamble and American Airlines parent company AMR. The agency alleges that Gupta tipped Galleon Management founder Raj Rajaratnam about Warren Buffett's $5 billion investment in Goldman and the investment bank's quarterly results.

"The SEC's allegations are totally baseless," said Gary Naftalis, counsel for Gupta, in a statement. "Mr. Gupta has done nothing wrong and is confident that these unfounded allegations will be rejected by any fair and impartial fact finder."

Gupta has served as managing director at McKinsey & Co, chairman of the advisory board for the Bill & Melinda Gates Foundation and chairman of the International Chamber of Commerce. He also has been associated in leadership roles with Harvard Business School, the Kellogg School of Management, Yale, the Global Fund for AIDS, Tuberculosis and Malaria and the American India Foundation.

P&G said on March 1 that Gupta had voluntarily resigned from the company's board of directors.

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