South West | Finance, business

Sberbank’s ‘independent’ director under US insider trading investigation

30 Apr '10

Rajat Gupta, a Goldman Sachs director, is currently under investigation in the United States for alleged insider trading…

According to The Wall Street Journal, Mr. Gupta is also an independent director of Russia’s Sberbank.

In 2008, the financier might have passed some inside information to Raj Rajaratnam, the founder of the Galleon hedge fund. The Galleon case was earlier reported by WSJ has reportedly learned about the allegations from court documents sent to Mr. Gupta’s counselor. US prosecutors are currently scrutinizing Goldman securities deals done by Mr. Rajaratnam and other Galleon people between June and October of 2008 in an effort to see if Rajat Gupta did in fact leak inside information to the personages.

A Gupta spokesman told WSJ that Mr. Gupta “…is unaware of any examination of any such issue and has done nothing wrong,” adding also that no criminal charges have been filed against the personage so far. The Wall Street Journal emphasizes that Gupta and Rajaratnam used to maintain good cooperation a few years ago; Mr. Gupta would routinely visit the Galleon offices and attend corporate parties.

A spokesperson for Sberbank Moscow reportedly refused to comment on the Gupta situation. It is known that Rajat Gupta joined the Sberbank board in 2008 to become the first foreigner there. Following his first year in office Mr. Gupta received a total of about 440,000 Euros in remuneration—a very extravagant salary compared to other Sberbank directors’ 25,000 Euros max. per person.

In today’s complicated world with its abundance of information possessing inside info is nearly synonymous to steering one’s company consistently in the right direction. For that matter an insider is compared to an external expert. The latter can provide an all-inclusive theoretical analysis as a basis for an informed decision, while the former possesses actual first-hand information.

In the media, insiders are typically referred to as ‘a source in… .’ There are various activities traceable to an insider:

- In criminal justice—an activity entailing misdemeanor or information leak undertaken by an insider in an attempt to help prosecute a real offender through disclosing some information (e.g., when government, corporations or other large entities are involved in a malfeasance case);

- In financial operations, insider trading is knows as trading with corporate securities based on inside information about the issuer; such trading is illegal in most cases;

- In day-to-day life, one possessing inside information is viewed as a source of most correct knowledge about something, which may not be in line with official data. Such info may be leaked to the press as an insider’s advice;

- In general business, insiders are individuals with access to confidential information about his/her company; insiders in this sense of the word are basically all directors and senior managers, as well as shareholders owning more than 10% of the firm.
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