A former board member of Goldman Sachs and Procter & Gamble pleaded not guilty Wednesday to federal charges accusing him of acting as "the illegal eyes and ears in the boardroom" for a friend, a billionaire hedge fund founder sentenced this month to 11 years in prison in the biggest insider trading case in history.
The case, built partially on wiretaps used for the first time in insider trading, has offered unprecedented insight into greed at the highest levels of Wall Street. The arrest of Rajat Gupta took it one step higher.
The indictment unsealed Wednesday accuses Gupta of cheating the markets with Raj Rajaratnam, the 54-year-old convicted hedge fund founder who was the probe's prime target.
Gupta, 62, quietly surrendered early in the day at the FBI's New York City office, a few blocks north of the ongoing Occupy Wall Street demonstration against what they call a culture of corporate greed. His lawyer called the allegations "totally baseless."
The charges carry a potential penalty of 105 years in prison.
The Securities and Exchange Commissioner originally brought civil fraud charges against Gupta in March. The SEC alleged that, at the height of the financial crisis, he passed along privileged financial information that helped enrich Rajaratnam, a former billionaire hedge fund manager who was the prime target of the criminal probe.
Gupta's lawyer responded by accusing the SEC of launching a "flawed case premised in large part on unreliable evidence being used in an attempt to bring down a man of sterling reputation and remarkable achievements without the procedural safeguards historically accorded to all persons similarly charged."
In a release, U.S. Attorney Preet Bharara said Gupta broke the trust of some of the nation's top public companies and "became the illegal eyes and ears in the boardroom for his friend and business associate, Raj Rajaratnam, who reaped enormous profits from Mr. Gupta's breach of duty."
With reporting from Jillian Weinberger