Exclusive! Enforcement Directorate to probe Rajat Gupta for money laundering

The Enforcement Directorate is initiating a probe against Rajat Gupta, former Indian-American Goldman Sachs director, who was charged for security fraud by a US federal court on Wednesday.

“We are examining Rajat Gupta under Prevention of Money Laundering Act, Part-C, an offence which has cross-border implications. We have information about his investments in India, but they are yet to be investigated,” a senior finance ministry official told DNA.

The Enforcement Directorate is the anti money laundering arm of the union finance ministry. According to sources, former McKinsey chief Rajat Gupta was earlier found involved in holding stakes in country’s oldest private sector bank Tamilnad Mercantile Bank through Mauritius-based bank.

“We suspect that control of shares in Tamilnad Mercantile bank was in violation and had no approval from the Reserve Bank of India (RBI). Besides, some of his other financial transactions are also under the scanner. A formal request would be sent to US authorities for seeking assistance in probe,” the official said.

Indian born Rajat Gupta, 62, is accused of leaking corporate secrets about the bank to his friend Raj Rajaratnam, the head of the Galleon Group hedge fund. Rajaratnam was sentenced to 11 years in prison this month for orchestrating a huge insider trading conspiracy. A federal grand jury in Manhattan charged Gupta, one of the most prominent Indian Americans in the financial sector, with one count of conspiracy to commit securities fraud and five counts of securities fraud, all related to Goldman tips in 2008. He is charged with offences that can keep him in jail for life. He is out on $10 million bail after pleading not guilty.

Preet Bharara, the Manhattan US Attorney reportedly said in a statement, “Rajat Gupta was entrusted by some of the premier institutions of American business to sit inside their boardrooms, among their executives and directors, and receive their confidential information so that he could give advice and counsel for the benefit of their shareholders.

“As alleged, he broke that trust and instead 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,” the statement said.