April 16, 2010Goldman Sachs director in Galleon probe
* Gov't examining whether Gupta shared inside information
* Gupta spokeswoman says he has done nothing wrong
* Former McKinsey head close to Rajaratnam
NEW YORK (Reuters) - Prosecutors are examining whether Goldman Sachs Group Inc director Rajat Gupta gave inside information about the bank to Galleon Group hedge fund founder Raj Rajaratnam, the Wall Street Journal reported Thursday, citing people close to the situation.
"Mr. Gupta is unaware of any examination of any such issue and has done nothing wrong," a spokeswoman for Gupta said in a statement responding to the report.
The Journal also said Gupta's decision to not stand for reelection was made after receiving notice from prosecutors that they were reviewing recorded conversations between him and Rajaratnam. Reuters had reported Gupta's decision in March, but it was unclear at the time that there was any association with the Galleon case.
Rajaratnam has pleaded not guilty to criminal insider trading charges. He faces a related civil lawsuit by the U.S. Securities and Exchange Commission.
In a March 22 letter made public last week, the government said it was examining trades by Rajaratnam and others in shares of several companies, as part of a wide-ranging insider trading probe.
Among these companies was Goldman, where trades between June 2008 and October 2008 were being examined. The bank's shares traded between $74 and $187 over that time.
Citing the people close to the situation, the Journal said the government was examining whether Gupta had shared inside information about Goldman, and whether he had given it to Rajaratnam during the height of the financial crisis.
It characterized Gupta, who used to run consultancy McKinsey & Co, as a close associate of Rajaratnam.
A McKinsey spokeswoman declined to comment, but said in a statement that McKinsey has "no knowledge of this alleged matter, which is unrelated to our firm."
Spokesmen for Goldman and Rajaratnam declined to comment.
Goldman said last month that Gupta was not standing for reelection to its board.
In late September 2008, Goldman won a $5 billion investment from Warren Buffett's Berkshire Hathaway Inc .
This is not the first time that someone who worked for McKinsey has surfaced in the Galleon investigation.
In January, former McKinsey director Anil Kumar -- charged by prosecutors with providing Rajaratnam with confidential information about several public companies with which McKinsey was working -- pleaded guilty to securities fraud.
Prosecutors charged that over a five-year period, Rajaratnam paid Kumar up to $2 million for the stock tips.
Authorities also contend that Kumar made an additional $600,000 over the years by reinvesting some of the money that Rajaratnam paid him in an account with Galleon.
In all, prosecutors contend they have evidence that Kumar provided Rajaratnam with confidential information about five companies that were McKinsey clients, including Business Objects, Spansion Inc and Advanced Micro Devices Inc .
In a Jan. 6 plea deal with federal prosecutors, Kumar agreed to "cooperate fully" with authorities and testify "with respect to any matters" that he is asked about.
The Journal previously had reported that Kumar had a close relationship with Gupta.
Kumar's lawyer, Robert Morvillo, was not available for comment
JP Morgan raised concerns about Galleon in 2001: report
