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Business News/ Opinion / Two questions about Rajat Gupta
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Two questions about Rajat Gupta

As Rajat Gupta's appeal is turned down and he heads for prison, there remain two questions to which we may never know the answers

Rajat Gupta was convicted of insider trading—specifically, passing on material non-public information to hedge fund trader Raj Rajaratnam—in June 2012. Photo: AFP Premium
Rajat Gupta was convicted of insider trading—specifically, passing on material non-public information to hedge fund trader Raj Rajaratnam—in June 2012. Photo: AFP

So Rajat Gupta will now have to finally go to prison. The former global head of McKinsey and Co., director of Goldman Sachs, and at one time, the world’s most respected corporate executive of Indian origin, will have to surrender to US prison authorities by 2pm on 17 June to begin a two-year sentence.

Gupta was convicted of insider trading—specifically, passing on material non-public information to hedge fund trader Raj Rajaratnam—in June 2012. Throughout the trial, Gupta had maintained his innocence, and had appealed the verdict immediately. But last month, a three-judge appeals panel upheld his conviction. Thus ends one of the most astonishing rags-to-riches story the corporate world has ever witnessed—from teenage orphan in India to McKinsey’s first non-US-born chief, special advisor to UN director-general Kofi Annan, friend to Bill Clinton and Bill Gates, admired and committed philanthropist and educationist, role model to thousands, if not hundreds of thousands, of young Indians.

While writing my book Fallen Angel: The Making and Unmaking of Rajat Gupta, as I researched the case, and Gupta’s life, and spoke to people who have known him since his student days or during his incredible career, I found that I was faced with a totally inscrutable personality. In fact, I had met Gupta a few times some years ago, and he had puzzled me deeply: either he was a perfect man, or he had built a perfect armour around himself (I had written about this in livement.com). But going through the evidence presented by the prosecution in the trial, I was left with no doubt that Gupta was guilty.

In January this year, at the Kolkata Literary Meet, I was in conversation with Anita Raghavan, the New York Times journalist who has written the other book on the subject—The Billionaire’s Apprentice: The Rise of the Indian-American Elite and the Fall of the Galleon Hedge Fund. As her title indicates, Raghavan looks at more than just Gupta, but at the heart of the book pulsates the enigma of this one man: the god who turned out to be a mere mortal looking for a few dollars more. Raghavan agreed with me that Gupta was guilty, and when, before going on stage, the moderator of the discussion asked us whether we thought that what had happened to Gupta was a modern-day Greek tragedy (something that Gupta’s lawyer had mentioned after his conviction), we both said no. There was no hero here brought down by cruel predestination or fate. This was a knight in apparently shining armour who had been caught in an act of petty burglary.

While I was writing my book, I had been asked two questions by two friends: one who had never met Gupta, and another who knew Gupta well. I had not mentioned these two questions before in public, but it may now be time to talk about them. But first, I must confess that I have no definite answers to these questions.

The first question, asked by the friend who had never met Gupta, was: Is it possible that a man of such great intelligence, with a resume that was, so to say, forged in the purest gold, would be committing such a crime for the first time, at the age of 62? I was nonplussed. As McKinsey’s worldwide managing director for nine years, Gupta had been privy to all sorts of corporate secrets. Just the sort of secrets that could make you very large sums of money on the stockmarkets, if you decided to take that path. How is it that Gupta remained scrupulously honest throughout his McKinsey career and then suddenly turned rogue after retirement?

Yet, evidence presented at Gupta’s trial (a phone conversation between him and Rajaratnam) proves that while he was still in McKinsey, Gupta was fully aware that his colleague and protégé Anil Kumar was selling insider information about McKinsey clients to Rajaratnam for money. This is a violation of the most sacrosanct of McKinsey’s code of conduct. It is also, of course, illegal. It has also come to light that while still employed at McKinsey, Gupta and Kumar set up a consultancy firm on the side in their wives’ name. This is again a serious breach of the McKinsey code.

So could it be that the Rajaratnam case was not the first time that Gupta did something illegal to make money, but just the first time that he got caught? We will never know.

One of the points that Gupta’s defence lawyers stressed repeatedly during his trial was that the prosecution had been unable to provide the slightest shred of evidence that Gupta made any money by passing on information to Rajaratnam. In fact, Gupta had lost money on an investment firm that he and Rajaratnam had set up as partners. Both facts are true. However, it also became clear during the trial that Rajaratnam had promised Gupta that he would establish a substantial private equity fund with him as partner and chairman. But before this could happen, the FBI came knocking on Rajaratnam’s door. So Gupta was certainly hoping for monetary gains in the future from his association with the Sri Lankan-origin billionaire hedge fund boss.

Therefore, the second question, which was asked by a top economist who had known Gupta well: Even if he did make money, would he be careless enough to leave a trail? There are enough ways in this world and enough tax havens to stash ill-gotten money away and never get caught—even our undereducated politicians who have possibly never travelled outside India, know that. And everyone agrees that Gupta is a man of razor-sharp intelligence, at ease in the global corporate and financial stratosphere.

Why would a man like Gupta, my friend asked, be in this unholy relationship with a rogue trader—and a man far below Gupta’s social and cultural class—for at least three years, just in the hope of some future (and uncertain) pay-off? And if he were making money, surely he would know the ways and means to make it near impossible for investigators to trace it?

Again, we will never know. Perhaps we should not even want to know. It is terrible enough to try to imagine what must be going through Gupta’s mind as his fall from grace becomes official and irreversible, and he heads for prison.

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Published: 18 Apr 2014, 02:03 PM IST
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