Federal prosecutors expanded their insider trading case against former Goldman Sachs Group Inc director Rajat Gupta on Tuesday, saying the illegal activity lasted longer and involved more trades than alleged.

A new indictment filed in Manhattan federal court expanded the period in which Gupta, 63, supposedly provided illegal tips to his friend Raj Rajaratnam, the Galleon Group hedge fund founder now serving an 11-year prison term following his insider trading conviction.

The charges now relate to trades that prosecutors said Rajaratnam made between March 2007 and January 2009 in the stock of Goldman and Procter & Gamble Co

, where Gupta was also a director.

Gupta, a former chief of the consulting firm McKinsey & Co, is the most prominent corporate executive to face insider trading charges in a wide-ranging federal probe since Rajaratnam was arrested in October 2009. He has pleaded not guilty.

Gary Naftalis, a lawyer for Gupta, said in a statement the new charges are baseless and rely on circumstantial evidence.

The facts in this case demonstrate that Mr. Gupta is innocent of all of these charges, and that he has always acted with honesty and integrity, Naftalis said. (Gupta) 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.

A spokeswoman for Rajaratnam's lawyers declined to comment.

NEW DETAILS ALLEGED

While the revised indictment does not accuse Gupta of directly profiting from suspect trades, its adds details about his financial relationship with Rajaratnam, including a stake in four Galleon funds.

Gupta was previously accused of tipping Rajaratnam about Goldman's activities during the 2008 financial crisis, including an investment from Warren Buffett's Berkshire Hathaway Inc , leading to profitable trades for Rajaratnam in September and October of that year.

The new charges include an allegation that Rajaratnam bought at least 350,000 Goldman shares on March 12, 2007, soon after the audit committee of Goldman's board, including Gupta, discussed the better-than-expected quarterly results that the bank would release the next day.

They also contend that Rajaratnam on January 29, 2009 sold 180,000 P&G shares short, a bet they would decline, after learning details from Gupta about the consumer product company's expected earnings announcement the next day. P&G shares fell 6.4 percent on January 30.

Gupta was global head of McKinsey for nine years until he retired in 2007. He joined Goldman's board in 2006 and left in May 2010, seven months after Rajaratnam's arrest. He was also a director at P&G and American Airlines Corp .

Both indictments charge Gupta with five counts of securities fraud and one count of conspiracy. Gupta was released on $10 million bail following his arrest. U.S. District Judge Jed Rakoff presides over the case.

The case is U.S. v. Gupta, U.S. District Court, Southern District of New York, No. 11-907. Follow me here: @bkatzoom, for more legal news follow @ReutersLegal

(Reporting By Jonathan Stempel and Basil Katz; editing by Matthew Lewis and Andre Grenon)

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