(Image source: Opuix Media News)

BY: MIKKEL NOEL LANZKY

U.S. Prosecutors announced Wednesday Rajat Gupta, a former director at Goldman Sachs and Procter & Gamble, is being indicted on insider trading. The indictment was expected after Gupta’s name came up in the trial against Raj Rajaratnam, who was recently sentenced for insider trading. CNBC reports.

“It is a lot of things that we already knew, now that this indictment has been unsealed against Rajat Gupta. One count of conspiracy, five counts of securities fraud, facing a maximum penalty of five years in prison on the conspiracy count and 20 years on each of the fraud counts.”

The prosecution says Gupta called Rajaratnam with privileged information likely to impact stock prices: information that Rajaratnam then traded on, reaping illicit gains. But that could become difficult to prove, as The New York Times reports:

“Two of the most incriminating calls played in court pertained to tips that the government said had come from Mr. Gupta. But those calls were conversations between Mr. xRajaratnam and his employees, which could make them inadmissible in a trial of Mr. Gupta.”

Whether or not Gupta gained anything himself from supplying the information will also be important in proving him guilty. Even if monetary gains aren’t obvious, guilt can still be proven. Lawyer Jonathan S. Sack explains to The Wall Street Journal:

“The idea is that absent some personal gain, there has been no breach of duty to stockholders. But the [Supreme] court defined 'benefit' broadly to include 'a pecuniary gain or a reputational benefit that will translate into future earnings.'”

The defense is countering the allegation of wrongdoing. According to the Financial Times, Gupta’s lawyer Gary P. Naftalis released a statement, calling the allegations “totally baseless” and claiming that:

“Mr Gupta 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 […] There were legitimate reasons for any communications between Mr Gupta and Mr Rajaratnam.”

Gupta is the biggest target so far in the authorities’ effort to root out wrongdoing on Wall Street after the 2008 financial collapse. And Gupta isn’t just anybody, as Andrew Ross Sorkin says on MSNBC:

“So this is probably one of the highest profile people in the business world to get ensnared in this. This was someone who advised people like Bill and Melinda Gates on their foundation, Jeffrey Immelt at G.E., so he was really in the really high ranks of the corporate world.”

Transcript by Newsy.