NEW YORK (AP) ― A former board member of Goldman Sachs and Procter & Gamble surrendered Wednesday after a federal indictment was unsealed accusing him of acting as “the illegal eyes and ears in the boardroom” for a friend who was already convicted in the biggest insider trading case in history.

The case, built partially on use of wiretaps for the first time in insider trading, stands to offer unprecedented insight into allegations of greed at the highest levels of Wall Street.

The indictment unsealed Wednesday accuses Rajat Gupta of cheating the markets with Raj Rajaratnam, the convicted hedge fund founder who was the probe’s prime target.

The Indian-born Gupta, 62, a Connecticut resident, quietly surrendered early Wednesday at the FBI’s New York City office, located a few blocks north of the ongoing Occupy Wall Street demonstration against corporate greed. His lawyer called the allegations “totally baseless.”

He was awaiting an arraignment on one count of conspiracy to commit securities fraud and five counts of securities fraud. The charges carry a potential penalty of 105 years in prison.

The indictment unsealed in U.S. District Court in Manhattan alleges Gupta shared confidential information about both Goldman Sachs and Procter & Gamble at the height of the financial crisis from 2008 through January 2009, knowing that Rajaratnam would use the secrets to buy and sell stock ahead of public announcements.

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.”







Alluding to the wide scope of the prosecution, he added: “Today we allege that the corruption we have seen in the trading cubicles, investment firms, law firms, expert consulting firms, medical labs, and corporate suites also insinuated itself into the boardrooms of elite companies.”

In all, 56 people have been charged in insider trading cases since Bharara took over shortly before Rajaratanam’s October 2009 arrest. Of those, 51 have been convicted and 21 sentenced to prison terms ranging from no prison time to 11 years.

FBI Assistant Director-in-Charge Janice Fedarcyk said Gupta’s arrest was the latest to occur in an initiative launched by the FBI in 2007 against hedge fund cheats.

“The conduct alleged is not an inadvertent slip of the tongue by Mr. Gupta,” she said. “His eagerness to pass along inside information to Rajaratnam is nowhere more starkly evident than in the two instances where a total of 39 seconds elapsed between his learning of crucial Goldman Sachs information and lavishing it on his good friend.”

The prosecutions for the first time employed extensive use of wiretaps to catch insider trading suspects. If the Gupta case goes to trial, taped conversations would be key evidence, as it was in the Rajaratnam trial.

The Rajaratnam probe led to a major spinoff investigation of expert networking firms, which link employees at public companies with hedge fund managers.

Gupta’s lawyer, Gary P. Naftalis, said in a statement Wednesday that his client only had legitimate communications with Rajaratnam.

“The government’s allegations are totally baseless,” he said. “The facts in this case demonstrate that Mr. Gupta is innocent of any of these charges and that he has always acted with honesty and integrity. ... We are confident that these accusations _ which are based entirely on circumstantial evidence _ cannot withstand scrutiny and that Mr. Gupta will be completely exonerated of any wrongdoing.”

Aside from being a former director of the Wall Street powerhouse Goldman Sachs, Gupta is the former chief of McKinsey & Co., a highly regarded global consulting firm that zealously guards its reputation for discretion and integrity.

Gupta was also a former director of the huge consumer products company Procter & Gamble Co., a pillar of American industry and one of the 30 companies that make up the Dow Jones industrial average. P&G owns many well-known brands including Bounty, Tide and Pringles.

The defendant’s name played prominently at the criminal trial earlier this year of Rajaratnam, who was convicted after prosecutors used a trove of wiretaps on which he could be heard coaxing a crew of corporate tipsters into giving him an illegal edge on blockbuster trades.

Jurors heard testimony that at an Oct. 23, 2008, Goldman board meeting, members were told that the investment bank was facing a quarterly loss for the first time since it had gone public in 1999.

Prosecutors produced phone records showing Gupta called Rajaratnam 23 seconds after the meeting ended, causing Rajaratnam to sell his entire position in Goldman the next morning and save millions of dollars.