Former Goldman Director Gupta Reports to Federal Prison

Former Goldman Sachs Group Inc. Director Rajat Gupta, convicted of insider trading in a scheme masterminded by hedge fund billionaire Raj Rajaratnam, joined his co-conspirator in a Massachusetts federal prison to begin serving a two-year sentence.

Gupta, 65, reported today to the Federal Medical Center Devens, where he’s assigned to a minimum-security satellite camp, said Ed Ross, a spokesman for the Federal Bureau of Prisons. Rajaratnam is serving an 11-year sentence in the complex’s medical prison. While the facilities are separate, it is possible the two could cross paths, Ross said.

Gupta last week failed in a last-ditch effort to remain free while he appeals his conviction. Supreme Court Justice Ruth Bader Ginsburg refused to order his continued release on bail.

Gupta today lost his appeal of a $13.9 million civil fine by the U.S. Securities and Exchange Commission. The federal appeals court in New York upheld the fine and an order permanently barring him from acting as an officer or director of a public company and from associating with any broker or investment adviser.

Highest Profile

A former McKinsey & Co. managing partner, Gupta is the highest-profile executive convicted in a U.S. crackdown on insider trading at hedge funds. Since August 2009, prosecutors in the office of Manhattan U.S. Attorney Preet Bharara have charged 86 people with insider trading, with 81 cases resulting in convictions, mostly through guilty pleas.

Gupta was found guilty in 2012 of passing illegal tips to Raj Rajaratnam, a co-founder of the Galleon Group LLC hedge fund.

The insider-trading trial of Raj Rajaratnam’s brother, Rengan Rajaratnam, began in Manhattan federal court today with jury selection.

The prison camp where Gupta will serve his time houses about 130 inmates on ground formerly occupied by a military base, about 40 miles (60 kilometers) west of Boston, according to the Bureau of Prisons.

The adjacent medical center, where Rajaratnam is assigned because he has diabetes and kidney disease, has about 1,000 inmates, most of whom require medical or mental health care. About 40 percent of the inmates are sex offenders, including child molesters and men serving sentences for Internet sex crimes, according to the Bureau of Prisons.

Gary Naftalis, a lawyer for Gupta, declined to comment on the appeals court ruling and on his client reporting to prison.

The case is U.S. v. Gupta, 11-cr-00907, U.S. District Court, Southern District of New York (Manhattan).

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