If press reports of the evidence against former Goldman Sachs Director Rajat Gupta are correct, he will have no choice but to try to negotiate a plea agreement with federal prosecutors in the insider trading case against him. He was charged by the SEC with providing confidential information about Warren Buffett’s Berkshire Hathaway’s plan to invest $5 billion in Goldman. Reports yesterday suggested he waited less than a minute before calling his friend Raj Rajaratnam, a hedge fund manager who used the tip to trade for profit. Rajaratnam’s fund, Galleon earned over $900,000 in profit. No information has been released concerning potential criminal charges against Gupta but if the information released is correct, he has exposure to this. Rajaratnam’s trial begins next week. Of course, the government could decide not to plead away any charges as Gupta is clearly one of the most successful and influential targets of its investigation. However, a lot may depend on what Gupta has to offer in plea negotiations. Clearly, a person in his position would be aware of others involved at higher levels. The next week will tell a lot. if Gupta can engage the federal authorities early on he might be able to plea for a few years in federal prison and significant fines, along with testimony against others in high positions. His lawyer Gary Naftalis has said so far that the charges are totally baseless noting that his client is not accused of trading stocks himself or sharing any profits. That will only go so far if the evidence against his client is as has been reported. Rajaratnam faces up to 185 years in prison and notwithstanding his excellent counsel who has done an excellent job in revealing some weaknesses in the prosecutions case, it is likely that Rajaratnam is also trying to negotiate with the government now. His time is running low in a case where there appears to be a lot of evidence. Of course until he is convicted, he is innocent. If the government prosecutors use the same tactics against Gupta that they used against Rajaratnam, he should be guarded in cooperating with the SEC. One of Rajaratnam’s key defenses in his criminal case is that he was fully cooperative with the SEC and expected to be able to resolve his issues with the government at that level but that the government authorities, including criminal prosecutors had a plan all along to indict him criminally based on the self same information that he rendered voluntarily to the SEC. This, he argued, is a form of entrapment which should not be allowed and which the jury should reject. So Gupta has a lot to consider at this stage.