As preparations begin for the March 8 trial of Raj Rajaratnam, accused of masterminding a massive insider trading ring as CEO of the Galleon Management hedge funds, the Securities and Exchange Commission has charged Rajat Gupta, a well-known and respected management consultant, with leaking insider information. In a cease-and-desist order released today, the SEC alleges that Galleon earned illegal profits or avoided losses of $17 million because of Gupta’s tips.

Gupta, the former managing director of consulting firm McKinsey & Co., was a member of  the board of directors at Goldman Sachs. In 2008, at the height of the financial crisis that was rocking Wall Street, Warren Buffett’s Berkshire Hathaway was getting ready to invest $5 billion in Goldman Sachs. In the afternoon of September 23, the Goldman Sachs board held a special meeting to approve Berkshire Hathaway’s investment.

The SEC order says: “As Gupta knew, Berkshire was one of the most respected and influential investors and its decision to make such a large investment in Goldman Sachs would likely be viewed as a strong vote of confidence in the firm when the information was disclosed to the public. The infusion of a large amount of new capital in the firm also would likely be viewed favorably by investors. Gupta participated in the Board meeting telephonically, staying connected to the call until approximately 3:53 p.m. Immediately after disconnecting from the Board call, Gupta called Rajaratnam from the same line. Within a minute after this telephone conversation, at 3:56 p.m. and 3:57 p.m., and just minutes before the close of the markets, Rajaratnam caused the Galleon Tech funds to purchase more than 175,000 additional Goldman Sachs shares.”

SEC documents list two more incidents involving leaks of information concerning Goldman Sachs, and one involving Procter & Gamble, where Gupta was a board member. In each instance, Rajaratnam is alleged to have made stock trades immediately after speaking with Gupta – and before the information became publicly available.

Rumors about Gupta’s ties with Galleon have been circulating for more than a year, but Gupta has always denied wrongdoing. According to his attorney, Gary Naftalis, who spoke with The New York Times, “Mr. Gupta has done nothing wrong…There is no allegation that Mr. Gupta traded in any of these securities or shared in any profits as part of any quid pro quo.” Naftalis added that Gupta “had lost his entire $10 million investment in a fund managed by Mr. Rajaratnam during the period of the S.E.C. allegations.”

Even if Naftalis is right, Gupta may be guilty of either being naïve or indiscreet – or both — in sharing information with Rajaratnam. In any case, his reputation has been severely bruised. And in the world of management consulting, where discretion matters so much, that will be a difficult handicap to overcome.