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Source: Former Goldman Sachs director to surrender

From Susan Candiotti, CNN National Correspondent
updated 12:02 AM EDT, Wed October 26, 2011
Rajat Gupta, senior partner emeritus at McKinsey and Company, as pictured at the World Economic Forum on January 28, 2010, in Davos, Switzerland.
Rajat Gupta, senior partner emeritus at McKinsey and Company, as pictured at the World Economic Forum on January 28, 2010, in Davos, Switzerland.
STORY HIGHLIGHTS
  • Source: Former Goldman Sachs executive Gupta to surrender
  • Case stems from prosecution of hedge fund founder
  • In that trial, Raj Rajaratnam was accused of insider trading

New York (CNN) -- Former Goldman Sachs Director Rajat Gupta is expected to turn himself in to the FBI Wednesday morning to face federal charges, a source familiar with the case told CNN.

The investigation against Gupta, who led McKinsey & Co., stems from the trial of hedge fund founder Raj Rajaratnam, the source said Tuesday.

It was not immediately clear what charges Gupta may face. An FBI spokesman declined comment.

Rajaratnam, former manager of the defunct hedge fund Galleon Group, was sentenced this month to 11 years in federal prison -- a record for insider trading -- and fined $10 million. He was found guilty on May 11 of all 14 counts of conspiracy and fraud, after netting $64 million on a long-running insider trading scam.

Rajaratnam was accused of profiting on trades he made using non-public information.

During the trial, prosecutors played dozens of wiretapped phone calls in which Rajaratnam discussed proprietary information on big companies, including Goldman Sachs.

The prosecution said the recordings showed Rajaratnam receiving information from Gupta that he used to make $17 million in illegal profits.

Gupta's attorney, Gary Naftalis, said that "any allegation that Rajat Gupta engaged in any unlawful conduct is totally baseless."

"The facts demonstrate that Mr. Gupta is an innocent man and that he has always acted with honesty and integrity. He did not trade in any securities, did not tip Mr. Rajaratnam so he could trade, and did not share in any profits as part of any quid pro quo."

Rajaratnam managed $7 billion at Galleon before the hedge fund shut down following his indictment in 2009.

CNN's Kevin McKinnon contributed to this report.

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