“There is sufficiency in the world for man’s need but not for man’s greed”- Mahatma Gandhi
The rise of Rajat
Another Indian had made it big. Born in Kolkata to parents of exiguous means, Rajat Gupta had been handed the baton of the Indian dream at a young age. Having attended IIT and subsequently Harvard Business School, he began his meteoric rise in corporate America. From a middle class family in India to one of Wall Street’s most powerful players, the story of Rajat Gupta was nothing less than a fairy tale.
But the Fairytale had a murky twist
To his dismay, Mr. Gupta found himself in the middle of a grave controversy: Wall Street’s biggest insider trading scandal. Found guilty, Gupta was sentenced to two years in prison, an event that would besmirch his image beyond repair.
How did all this happen? Let us take a look.
When Rajat met Raj
It all began in the early 1990s. Gupta was a corporate rock star, a master networker who had also developed a reputation for himself as a philanthropist. Through his philanthropy he had established relationships with big names such as Bill Clinton, Hank Paulson and Bill Gates.
However Rajat’s latest philanthropic venture would be the establishment of a business school in Hyderabad. Through a mutual friend he met Raj Rajaratnam, founder of a hedge fund, Galleon Group. This new acquaintance would prove to be a fateful one.
It was an unusual combination: The laconic, larger than life Mr. Gupta and the haughty, flamboyant billionaire Rajaratnam. Nevertheless their friendship started to grow. Soon they started investing together in various ventures, in vehicles related to both Galleon Group and an Asia-focused fund Gupta had co-founded.
A friend in need is a friend indeed
Their friendship grew into mutual trust. Soon Mr. Gupta started leaking confidential information to his friend from board meetings of Procter & Gamble and Goldman Sachs. This transfer of insider information to an external player is known as insider trading: an egregious crime in corporate America.
The leaked information eased several important business decisions for Galleon, providing it with an undue advantage.
What is insider trading?
According to the Securities and Exchange Commission, USA:
Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security.
The term “tipping” refers to the act of providing confidential information to someone who is not authorized to have that information.
This is precisely what Gupta had done. He had merely tipped his friend with some inside information. In certain countries, this might be considered a venial sin, even legal. But this transgression proved costly for Gupta.
Catching the offenders
In September 2013, the FBI was able to intercept a phone call made by Gupta to Rajratnam shortly after a board meeting, discussing a $5 billion investment in Goldman Sachs by Berkshire Hathaway.
This information gave Rajaratnam a shot in the arm and he invested money in Goldman Sachs stock earning nearly $1 million.
In 2009 the conspiracy came to the fore and Gupta and Rajaratnam were found guilty under several grounds. Rajaratnam is currently serving a term of 11 years in prison.
Rajat Gupta faced a term of 2 years.
Finally, on 13th March 2016, Sunday, Rajat Gupta completed his term in prison.
What next for Rajat Gupta?
Rajat Gupta rose from dust to the acme of success only to hit dust again. Sources reveal that Gupta is eager to get back to the world he once inhabited. He has also appealed for the overruling of his conviction.
Will his chequered past continue to haunt him or will he manage to shrug off his conviction and regain his lost glory? We must wait and watch.
Views presented in the article are those of the author and not of ED.