Friday, October 28, 2011

Just When We Thought It Was Over, Another Insider Trading Indictment

Rajat Kumar Gupta - World Economic Forum Annua...Image by World Economic Forum via FlickrRajat Gupta pleaded not guilty to insider trading on Wednesday. His indictment comes mere weeks after Raj Rajaratnam was sentenced to eleven years in prison.

Gupta, a graduate of Harvard, was head of McKinsey and Company for a time, and has held senior leadership positions at Goldman Sachs and Proctor and Gamble. By all accounts he was well respected.

While NY Times Dealbook is touting this as the first arrest in this scandal to reach beyond Wall Street and into the corporate boardroom, that isn’t completely accurate. Let’s remember that senior executives at IBM (Bob Moffat), Intel (Rajiv Goel), and McKinsey (Anil Kumar), are all paying the price for their parts in this insider trading ring.

In total, 29 defendants have been charged, including both professional traders and corporate insiders. In practice, for an insider trading ring to be effective, there need to be insiders who have access to confidential information.

Nevertheless, whether the charges against Gupta will hold is yet to be seen. What we know for sure is that the story is not over yet.

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