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Governance, Risk Management, and Compliance: It Can't Happen to Us—Avoiding Corporate Disaster While Driving Success by Richard M. Steinberg

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Another Leak—What Was He Thinking?

Or more to the point, was he thinking at all? We're talking about Rajat Gupta, operating at the highest echelons of multinational business, who recently found himself charged by the Securities and Exchange Commission with illegally passing inside information to Raj Rajaratnam—since convicted on 14 counts of fraud and conspiracy—as the Galleon Group founder was about to go on trial on charges of insider trading. Mr. Gupta, a Harvard Business School graduate and former head of McKinsey & Co., has been a board member of the likes of Goldman Sachs, Procter & Gamble, and AMR, parent of American Airlines.

What did he do? Well, of course he's innocent until proven guilty, and according to media reports, his lawyer says he has done nothing wrong. But the SEC says otherwise. It alleges Gupta gave Rajaratnam advance information about earnings at both Goldman and P&G. On top of that, the SEC maintains that Gupta called the Galleon head with the inside scoop of the Goldman board's approval of Warren Buffett's $5 billion investment in the firm. The allegations speak to multiple phone calls between the two men, enabling Galleon to reap millions in profits. What must be particularly troubling for both is that the SEC says it has records of numerous telephone conversations. One played in the courtroom early on in the Rajaratnam trial has Gupta telling Rajaratnam of details of sensitive Goldman board deliberations concerning acquisitions of such firms as Wachovia ...

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