WASHINGTON: A federal jury on Friday (15 June 2012) convicted Rajat Gupta, the Indian-American business icon who strode the US corporate world and moved with the country’s high and mighty, of insider trading in a case that illustrated greed, guts, and glory in America’s most successful immigrant community.
Gupta, 63, a former director of Goldman Sachs and Procter and Gamble among other storied companies, was found guilty on four out of six counts—three for securities fraud and one for conspiracy. He could receive up to 25 years in prison. The maximum sentence for securities fraud is 20 years and the maximum sentence for conspiracy is five years. But Gupta’s defence team indicated that ten years was the maximum he would get.
Gupta is free to appeal, but in the US such verdicts are rarely overturned. He will be out on bail till the sentencing is announced on October 18.
Indian-American prosecutes Gupta
Rajat Gupta counted the Clintons, Gates and many other political and business elites among his friends. He grew up as orphan in India before coming to the US to attend Harvard Business School, after which he joined the consulting company McKinsey, where he rose to become the managing director, the highest post. He is generally regarded as the first Indian-born CEO of a global corporation, and is a co-founder of the Indian School of Business in Hyderabad, and the American India Foundation.
Quite remarkably, Gupta was prosecuted by another Indian-American, New York Southern District US Attorney Preet Bharara, whose war against white collar crime had snared scores of Wall Street hotshots, including many South Asians.
In the Gupta case, Bharara’s prosecution team charged and proved to the satisfaction of the jury that he passed on information about Goldman Sachs and P&G to Sri Lankan-origin businessman Raj Rajaratnam before they were publicly announced, enabling the latter’s Galleon Funds to make multi-million dollar profits and avoid losses. Several other corporate managers of Indian-origin were involved in the case and received lighter sentences in exchange for testimony. Before Bharara’s crusade against such actions, known as insider trading, white collar crimes of this kind were rarely punished, particularly when they involved well-connected elites. But Bharara, a Ferozepur, Punjab- born immigrant who was chosen by Obama to be the Manhattan prosecutorial watchdog, has ripped into this cozy Wall Street arrangement, often using controversial methods such as wiretaps and informants.
In the Gupta case, Bharara’s team, using phone records and trading sequences, showed that Rajat Gupta placed a call to Raj Rajaratnam within a minute after disconnecting from a conference call in which the Goldman Sachs board (of which Gupta was member) approved billionaire investor Warren Buffett’s $5 billion investment in the firm towards the close of market on September 23, 2008. Gupta and Rajaratnam spoke for 30 seconds. With minutes to go before the market closed, Rajratnam ordered his traders to buy shares of Goldman, making a neat profit for $1.2 million.
That phone call will now send Gupta to prison, where Rajaratnam is already cooling his heels after an 11-year sentence last October.
(Times of India, 16 June 2012)