Kolkata to New York, IIT to Harvard, McKinsey to Goldman Sachs, Insider Trading to Insider, from where to where! Steep rise and a deep fall of an Individual.
The Rise:
Rajat Kumar Gupta, 65 years, born in Kolkata, went on to do engineering in IIT, Delhi and then MBA from Harvard Business School.
Later he became the Managing Director of McKinsey & Company and also a board member in many companies including prestigious companies such as Goldman Sachs, Procter & Gamble etc.
As an entrepreneur, he co-founded Indian School of Business (ISB), New Silk Route among other ventures. [Note: New Silk route is a Global Private Equity company; they have invested in Bangalore food chain Vasudev Adigas]
Last but not the least; he is also active in philanthropic and academic endeavors by being an advisor at Harvard, Kellogg School of Management, American India Foundation etc.
The Fall
Long story cut short:
During March, 2014, Federal Appeal Court upheld the judgment of U S District Court convicting Mr.Rajatof insider trading. He has been handed a two year imprisonment, asked to pay a penalty of 13.9 Million USD (Means Rs.83 Crores) and permanently barred from acting as an officer or director of a public company.
Mr. Rajat then lodged an appeal with the U S Supreme Court for bail but the bail application was rejected by the Apex court. Hence Mr. Rajat will be an “insider” from 17th June,2014 on charges of Insider Trading.
The Reason:
What are the charges against him?
The Securities and Exchange Commission (SEC) filed a complaint in 2011 alleging that Mr. Gupta disclosed confidential information to Mr.Rajaratnam (Mr.Gupta’s friend) about a $ 5 billion investment in Goldman Sachs by Berkshire Hathaway Inc.’s (Warran Buffet’s company) as well as non-public details about Goldman Sachs’ financial results of 2008. Thereby, Mr.Rajaratnam got the benefit of trading in stocks by the insider information provided by Mr. Gupta. It is accused that Mr. Raj would have compensated Gupta for this insider information.
As I mentioned elsewhere in the article, Mr. Gupta was on the board of Goldman Sachs and knew about the decisions of the Board.
The Friends:
Who is Rajaratnam? He is a billionaire and a hedge fund manager, came in touch with Gupta through a common friend Mr.Anil Kumar (co-founder of ISB). Mr Rajaratnam became a friend of Gupta and started investing millions of dollars together. During their discussions, it is alleged that Mr. Gupta had leaked inside information to Mr. Raj because of their friendship and business dealings. Currently, Mr. Rajratnam is convicted and serving 11 years imprisonment in US.
There are a lot many things to write about this case. But our articles are meant for busy individuals who don’t have time to read lengthy and complicated articles (right word is ‘research paper!) but needs to know the details of the case. This article is a summary and I hope it serves the purpose.
The Contrast:
I am astonished to see the depth of American Legal System, look at the punishment (financial Rs.80 Crore, imprisonment for 2 years and the future – the lifetime ban from directorship of public companies)
In contrast, can we ever think of punishing people who have committed similar frauds in India? I will leave this point to your imagination.
Maybe our mistakes are what make our fate.