Ex-Goldman director Rajat Gupta may face more allegations: U.S.

Rajat Gupta, (C) a former director of Goldman Sachs Group Inc., exits Manhattan Federal Court in New York with his lawyers, February 7, 2012.

NEW YORK (Reuters) - Rajat Gupta, a former director of Goldman Sachs and Procter & Gamble who is the highest-ranking executive charged in a U.S. crackdown on insider trading, could face additional allegations, a federal prosecutor said on Tuesday.

Prosecutor Reed Brodsky told a New York federal judge that the government was prepared to reveal in the coming weeks other insider trading tips that advanced the conspiracy between Gupta and his one-time friend, convicted Galleon hedge fund founder Raj Rajaratnam. Gupta was originally charged last October.

A week ago, prosecutors unsealed an amended indictment against Gupta, who is also a former global head of the McKinsey & Co consultancy. At Tuesday's hearing, Gupta went through the formality of pleading not guilty to the new indictment, only to hear that the government was pressing ahead with its investigation.

Gupta's lawyer, Gary Naftalis, won a ruling from U.S. District Judge Jed Rakoff to postpone the trial to May 21 from April 9 so Naftalis could prepare a defense against the new allegations.

"The government is wildly expanding what everybody in the world understands this case to be about," Naftalis said. "It's time to stop and try the case that they originally brought."

Gupta, 63, was charged in October with securities fraud and conspiracy, accused of providing inside tips about Goldman and Procter & Gamble board meetings to Rajaratnam in 2008. A superseding indictment announced on January 31 included allegations of tips in 2007.

Prosecutors said Gupta participated in a Goldman conference call meeting in March 2007 from Galleon's offices. The call was about quarterly earnings that exceeded analyst's expectations. Rajaratnam bought Goldman stock 25 minutes after the call ended, prosecutors said.

Gupta has denied the allegations.

Dozens of hedge fund managers, lawyers and executives, including Rajaratnam, have been convicted since 2009.

Rajaratnam is serving an 11-year prison sentence after a jury convicted him on evidence based largely on telephone conversations secretly recorded by the FBI.

Investigators recorded at least two discussions between Rajaratnam and Gupta.

The government contends that Gupta provided Rajaratnam with advance knowledge of Warren Buffett's $5 billion investment in Goldman at the height of the 2008 financial crisis, information about Goldman's surprise fourth-quarter loss in 2008 and P&G's quarterly earnings in late January 2009.

Naftalis said that part of the defense would be to emphasize that in 2008 and 2009 relations between Gupta and Rajaratnam had deteriorated. He said Gupta lost all of a $10 million investment he made with the Galleon hedge fund manager.

The case is USA v Gupta, U.S. District Court for the Southern District of New York, No. 11-907.

(Reporting By Grant McCool)