UPDATE 3-Goldman Sachs director in Galleon probe – WSJ

* Gov’t examining whether Gupta shared inside info – WSJ

* Gupta spokeswoman says he has done nothing wrong

* Former McKinsey head close to Rajaratnam – WSJ
(Adds timing of Gupta’s decision to leave, paragraph 3)

NEW YORK, April 15 (BestGrowthStock) – Prosecutors are examining
whether Goldman Sachs Group Inc (GS.N: ) director Rajat Gupta
gave inside information about the bank to Galleon Group hedge
fund founder Raj Rajaratnam, the Wall Street Journal reported
on Thursday, citing people close to the situation.

“Mr. Gupta is unaware of any examination of any such issue
and has done nothing wrong,” a spokeswoman for Gupta said in a
statement responding to the report.

The Journal also said Gupta’s decision to not stand for
reelection was made after receiving notice from prosecutors
that they were reviewing recorded conversations between him and
Rajaratnam. Reuters had reported Gupta’s decision in March, but
it was unclear at the time that there was any association with
the Galleon case.

Rajaratnam has pleaded not guilty to criminal insider
trading charges. He faces a related civil lawsuit by the U.S.
Securities and Exchange Commission.

In a March 22 letter made public last week, the government
said it was examining trades by Rajaratnam and others in shares
of several companies, as part of a wide-ranging insider trading
probe.

Among these companies was Goldman, where trades between
June 2008 and October 2008 were being examined. The bank’s
shares traded between $74 and $187 over that time.

Citing the people close to the situation, the Journal said
the government was examining whether Gupta had shared inside
information about Goldman, and whether he had given it to
Rajaratnam during the height of the financial crisis.

It characterized Gupta, who used to run consultancy
McKinsey & Co, as a close associate of Rajaratnam.

A McKinsey spokeswoman declined to comment, but said in a
statement that McKinsey has “no knowledge of this alleged
matter, which is unrelated to our firm.”

Spokesmen for Goldman and Rajaratnam declined to comment.

Goldman said last month that Gupta was not standing for
reelection to its board.

In late September 2008, Goldman won a $5 billion investment
from Warren Buffett’s Berkshire Hathaway Inc (BRKa.N: )
(BRKb.N: ).

This is not the first time that someone who worked for
McKinsey has surfaced in the Galleon investigation.

In January, former McKinsey director Anil Kumar — charged
by prosecutors with providing Rajaratnam with confidential
information about several public companies with which McKinsey
was working — pleaded guilty to securities fraud.

Prosecutors charged that over a five-year period,
Rajaratnam paid Kumar up to $2 million for the stock tips.

Authorities also contend that Kumar made an additional
$600,000 over the years by reinvesting some of the money that
Rajaratnam paid him in an account with Galleon.

In all, prosecutors contend they have evidence that Kumar
provided Rajaratnam with confidential information about five
companies that were McKinsey clients, including Business
Objects, Spansion Inc (SPSNQ.PK: ) and Advanced Micro Devices Inc
(AMD.N: ).

In a Jan. 6 plea deal with federal prosecutors, Kumar
agreed to “cooperate fully” with authorities and testify “with
respect to any matters” that he is asked about.

The Journal previously had reported that Kumar had a close
relationship with Gupta.

Kumar’s lawyer, Robert Morvillo, was not available for
comment.

Penny Stocks

(Reporting by Steve Eder, Jonathan Stempel and Matthew
Goldstein; Editing by Ted Kerr, Gerald E. McCormick, Gary
Hill)

UPDATE 3-Goldman Sachs director in Galleon probe – WSJ