Raj Gupta Isn’t the First New Silk Route Pro with Insider Trading Troubles

Lots of press coverage today of Raj Gupta, an independent Goldman Sachs director who reportedly agreed to step down after learning that the Feds had intercepted phone calls implicating him in the Galleon insider trading case.

What the stories neglect to mention, however, is that Gupta currently helps run an India-focused private equity firm called New Silk Route. Moreover, he’s not the only New Silk Route pro who knows his way around an insider trading investigation.

The other would be Victor Menezes, listed as a senior advisor to New Silk Route. That sounds fairly part-time, but Menezes appears on the firm’s website as one of three faces on its “leadership” page. Gupta and firm Parag Saxena  — co-founder of Vedanta Capital and former head of Invesco Private Capital — also are listed.

Back in 2006, the SEC alleged that Menezes, then a Citigroup senior vice chairman, sold nearly $30 million of Citigroup stock just before the company announced a large quarterly loss related to the Argentinian debt crisis. The sale allegedly helped Menezes avoid around $1.5 million in losses. He later settled with the SEC for $2.7 million, without admitting or denying any wrongdoing.

Gupta has not yet been charged by the SEC, although The Wall Street Journal reports that he is believed to have tipped off Galleon manager Raj Rajaratnam about a $5 billion investment that Berkshire Hathaway was about to make in Goldman Sachs. Gupta denies any wrongdoing.

It’s also worth noting that Raj Rajaratnam himself was listed as a New Silk Route principal, according to this 2008 SEC filing. Moreover, DealBreaker reported last week that the New Silk Route principals actually raised money under a different moniker — Taj Capital — which put around half of its money into Galleon funds (I have not confirmed that info).

All of this melds together into a nightmare for New Silk Route, which currently is investing out of a $1.4 billion fund raised in 2007. Its most recent deal was a co-investment with KKR on Indian coffee shop chain Cafe Coffee Day, while in 2006 it co-invested with Galleon on a $300 million deal for Reliance Telecom Infrastructure.

Most of the firm’s staff is in India, save for the leadership in New York (plus two principals) and a few folks in Dubai. One had to wonder if the India folks could eventually take over management, thus leaving behind their scandal-laden pals in New York.

I’ve left messages with both a New Silk Route spokeswoman and Parag Saxena, and will update this post if I hear back. Via the firm’s website, you can watch video of Gupta here and of Menezes here.