NSR’s Gupta found guilty of insider trading

Rajat Gupta’s firm New Silk Route has worked for more than a year to convince its LPs that the insider trading scandal has nothing to do with its ability to generate strong returns.

New Silk Route co-founder Rajat Gupta has been found guilty of leaking confidential information to disgraced hedge fund manager Raj Rajaratnam, founder of Galleon Group, according to the Financial Times.

Gupta, who was arrested last October for allegedly sharing information he ascertained while sitting on the board of directors of Goldman Sachs and Procter & Gamble in 2008 and 2009, was found guilty of four of six counts of securities fraud, the report said. Gupta allegedly knew the information he shared would be used to make trades, according to the original complaint from the US Federal Bureau of Investigation, and could face a decade in prison when sentenced later this year.

New Silk Route, which was founded in 2006, has worked since early 2011 to convince its limited partners that the insider trading scandal has nothing to do with the firm and its ability to generate solid returns. The firm has had to communicate consistently with its LPs to keep them apprised of the Gupta situation and keep them confident that the fund itself and its performance have not been impacted, Parag Saxena, co-founder of New Silk Route, told Private Equity International in an exclusive interview last year.

“We reminded LPs that this had nothing to do with New Silk Route … it had to do with Rajat’s board memberships with Goldman Sach,” Saxena said at the time. LPs want to know, ‘What does this mean for me?’ On that front, ‘in terms of your investment’, we told them, ‘there is absolutely no change’. Our deal flow is just as strong; our team, with more than 25 people and 10 partners, is a deep one.”

New Silk Route was not available for comment at press time. Gupta had been on leave of absence from the firm since March 2011.

“Since that time, Gupta has not been involved in the day-to-day running of the firm, nor has he ever served on the boards of any of its investments,” the firm said in a statement last October. “The large and talented team at New Silk Route remains focused on delivering value to its investors across the globe and making investments in Asia, and particularly in India, one of the world’s fastest growing economies.”

One of the specific deals related to the charges involved Gupta allegedly disclosing material non-public information concerning Berkshire Hathaway’s $5 billion investment in Goldman Sachs before it was publicly announced on 23 September 2008. Rajaratnam was found guilty of conspiracy and securities fraud in May related to numerous allegations of insider trading and earlier this month was sentenced to 11 years in prison.