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P&G Board Member Resigns Amid Allegations of Insider Trading

The SEC charged Rajat Gupta with illegally tipping Galleon Management founder and hedge fund manager Raj Rajaratnam with inside information.

Appeared In
Special Issue
WWDStyle issue 03/02/2011

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.