RAJAT GUPTA AND THE INSIDER TRADING

Rajat Gupta, former C E O of Mc Kinsey & company who had been charged of insider trading was asked before pronouncing Judgement as to what he had to say in the matter. All through the long trial period Mr.Gupta stood in the court immaculately dressed in dark suit and white shirt with an impassive face. But when the time came to open his mind before the Judge he was found shaken.


Rajat Gupta said: “ Your Honour thank you for the opportunity. The last 18 months have been the most challenging period of my life since I lost my parents as a teenager. I have lost my reputation that I have built over a life time. The verdict was devastating to my family, friends and me.Its implications to all aspects of my life, personal, professional and financial are profound. Much of the first year seemed surreal to me, however since the trial I have accepted the reality of my life going forward.”

 The F B I  in its intense investigation cracked a conversation between Rajaratnam and Rajat Gupta about Goldman Sachs. During the recession when Goldman Sachs, the Global investment banking firm got a 5 Billion Dollar investment from Warren Buffett’s Berkshire Hathaway it had the potential to make an impact on share prices of Goldman Sachs. Rajat Gupta as a Board Member got the information during its meeting and it is said that Mr.Gupta informed the News to his friend Rajaratnam when he asked about the rumors going round on it. On that information Rajaratnam bought shares of Goldman Sachs and  made a few Million Dollars.


On finding  Rajat Gupta guilty he was sentenced to two years' jail sentence, one year supervised release and five Million Dollar fine.  Rajat Gupta’s hundreds of friends in and outside the U.S. including Kofi Annan and Bill gates had written to the Judge to show leniency on Mr.Gupta considering his philanthropic works and sterling track record and avoid jail sentence.  Though the Jail sentence was not avoided the years were reduced to two against a potential term of ten or more years. Gupta’s friend Rajaratnam is in Jail now in the same case for a 11 year stint.


As a criminal offense, the insider trading has not been defined clearly. If it is a crime it is a rare sort of one as no one becomes a victim in that 'crime' since buying shares on any count only boosts the share market and its benefits are available for all shareholders.  Though insider trading in one way or other is universal it is difficult to trace out and far more difficult to prove in a court. This 'crime' needs no daggers or dark nights to enact, a casual remark over an evening drink is enough to trigger the action.


 Until Mr. Gupta was tried and punished he was one of the most successful personality among the emigrants in America and just after the court sentence he was termed as ‘an  unlucky man  by the Press and public. His Defense Attorney, Gary Naftalis, described the court sentence for Mr. Gupta as “ a fall of Greek tragedy proportions” and nobody in the court room thought it an overstatement.


Mr. Rajat Kumar Gupta was born to a middle class family in Calcutta, India, to Pran Kumari Gupta and Aswini Kumar Gupta in the year 1948. His father was a journalist and mother was a teacher. When Gupta was just sixteen years old his father died and his mother also died two years later and he became an orphan. He was an intelligent boy. He had 15th rank in all India level for the I I T  ( Indian institute of Technology, an high profile Institution in India ) where he graduated Mechanical Engineering. He declined domestic high profile jobs and went to the U.S and joined Harvard Business school and got an M B A.


Gupta joined McKinsey & Company in 1973 and gradually became its C E O, a rare achievement for an immigrant Indian in the  U.S.  He was in the Director Board of Goldman Sachs, Procter & Gamble,  A M R Harman international and in many other Boardrooms including Rockefeller foundation. He had co- founded Indian School of Business, a prestigious institution for business studies. He also found time for philanthropic works. He was Chairman for the Board for eradicating AIDS, tuberculosis, and Malaria and in many other similar ventures. He chaired many educational institutions too.


It was purely fate that intervened in the otherwise successful and happy life of Mr.Gupta. In the first place, both Mr.Gupta and Rajaratnam had no necessity to go out of the way to make some extra bucks. Rajaratnam is a Billionaire and a few Million in or out is no big deal for him. On the part of Mr.Gupta there is no proof that he made any money from the insider trading or from Rajaratnam for the tip off.

The case has not ended. Mr Gupta is going for an appeal and it is costly both financially and emotionally for him.


Images : Google