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Ex-Goldman Sachs board member convicted of securities fraud

Former Goldman Sachs board member Rajat Gupta lived the American Dream before being led astray by a wealthy friend who was a master at insider trading.

That was the view of two jurors who on Friday voted with 10 others to convict Gupta of three counts of securities fraud and one count of conspiracy for sharing corporate secrets with hedge fund manager Raj Rajaratnam.

With the verdict, Gupta became the most prominent defendant convicted so far in a wide-ranging Wall Street inquiry conducted by investigators armed with wiretaps.

Prosecutors had alleged that Gupta's tips gave Rajaratnam an edge over ordinary investors on trades of more than 350,000 shares of Goldman stock in 2008.

Rajaratnam, the billionaire founder of the Galleon hedge fund firm who was convicted last year, "was a very manipulative man," juror Rick Lebkowski said after the verdict. "He made it very easy for Mr. Gupta to give him this information."

Recordings of Rajaratnam and Gupta casually chatting on the phone convinced juror Ronnie Sesso that Rajaratnam "was a savvy and sneaky man. He was a little snake in the grass."

Gupta -- born in India, educated at Harvard and well-respected on Wall Street -- was "a wonderful example of the American Dream," Lebkowski said. "I wanted to believe the allegations weren't true." But on the counts the jury found Gupta guilty, "the evidence was overwhelming," he added.

The jury reached a not-guilty verdict on two other securities fraud counts after less than two days of deliberations at the insider trading trial in federal court in Manhattan.

In a statement, FBI Assistant Director Janice K. Fedarcyk called the conviction "the latest milestone in an FBI initiative undertaken in 2007 to zero in on illegal conduct in the hedge fund industry."

Added Fedarcyk: "Rajat Gupta broke the law, plain and simple."

Gupta, 63, of Westport, Conn., sat motionless while the verdict was read, but his adult daughters could be heard weeping. As the courtroom emptied, they hugged their father.

Defense attorney Gary Naftalis called the outcome a disappointment.

"We believe the facts of this case demonstrate that Mr. Gupta is innocent," he said. "He always acted with honesty and integrity."

Allegations that Gupta conspired with a convicted white-collar criminal represented a fall from grace: The defendant is a former chief of the global consulting firm McKinsey & Co. and a onetime director of the huge consumer products company Procter & Gamble Co. He also won admirers, including author and spiritual leader Deepak Chopra, with his philanthropy.

Gupta's stellar reputation began to unravel at last year's trial of Rajaratnam, when Goldman Sachs chairman Lloyd Blankfein testified that Gupta appeared to have violated the investment bank's confidentiality policies.