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P&G Board Member Resigns Over Insider Trading Charges

SEC accuses Rajat Gupta with feeding Galleon Management inside information.

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By: TOM BRANNA

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Rajat K. Gupta voluntarily resigned from Procter & Gamble Co.’s board Tuesday after being charged with insider trading. Gupta, the former worldwide director of McKinsey & Co., had served as a director of P&G since 2007.


The Securities and Exchange Commission on Tuesday charged the Westport, Conn.-based business consultant, who also is a former board member of Goldman Sachs, with illegally tipping Galleon Management founder and hedge fund manager Raj Rajaratnam with inside information about the quarterly earnings at both P&G and Goldman, as well as an impending $5 billion investment by Berkshire Hathaway Inc. in Goldman.


The SEC’s Division of Enforcement alleges that Gupta, a friend and business associate of Rajaratnam, provided him with confidential information learned during board calls while serving as a director of the two firms. In the case of P&G, Gupta allegedly disclosed to Rajaratnam inside information about the company’s financial results for the quarter ending Dec. 2008, based on a draft of the earnings release that had been mailed to Gupta and fellow P&G directors in advance of a directors conference call on Jan. 29, 2009, one day prior to the earnings call with Wall Street analysts.


The draft indicated P&G’s organic sales would fall short of public expectations. Gupta provided this information to Rajaratnam on Jan. 29, 2009, and Galleon funds then sold short about 180,000 P&G shares, making a profit of $570,000.


The SEC has previously charged Rajaratnam and others in a widespread insider trading scheme involving Galleon hedge funds.

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