03/01/2011 12:55 pm ET | Updated May 25, 2011

Rajat Gupta, Former Goldman Sachs Board Member, Accused Of Insider Trading By SEC

Goldman Sachs former director Rajat K. Gupta has been charged with insider trading by the Securities and Exchange Commission, for allegedly giving a hedge fund manager secret information about the bank's financial health.

Gupta, who left the Goldman board of directors last year, has been accused of participating in a $18 million insider trading scandal. He allegedly tipped off indicted Galleon Group founder Raj Rajaratnam twice in 2008, allowing the hedge fund to reap millions. The case is the latest example of the SEC's ramped-up effort to root out insider trading, and it constitutes a significant embarrassment for Goldman Sachs.

Gupta told Rajaratnam that Goldman was in better shape than expected, before second quarter earnings were announced in 2008, the SEC says. He also told the hedge fund manager that Warren Buffet's company Berkshire Hathaway was investing $5 billion in the bank, before that information was made public, according to the SEC's complaint.

Gupta, who was formerly the head of consulting giant McKinsey & Co., also sat on the board of directors of Procter & Gamble, and he stands accused of passing Rajaratnam secret information about that company as well.

The SEC previously charged Rajaratnam with insider trading. The billionaire hedge fund manager has pleaded not guilty.

After it came out last spring that the government was examining whether Gupta had shared secret information, Gupta left the Goldman board.

From Robert Khuzami, the SEC's director of enforcement:

"Gupta was honored with the highest trust of leading public companies, and he betrayed that trust by disclosing their most sensitive and valuable secrets."

READ the complaint below: