A week after Indian-American millionaire Rajat Gupta was convicted by a federal jury on charges of insider trading, the world is still fiercely divided into two camps —those who believe he was innocent and unfairly persecuted. And those who are convinced he acted out of greed, out of a desire to be better than those he hobnobbed with. Gupta’s defence painfully emphasised his track record of stellar conduct through his philanthropy. It’s easy to see why jurors, though, could only see common folly in an uncommon man.
Gupta’s recklessness, it would seem, lay in assuming that he was too smart to be caught doing the silly thing and too pedigreed to be spotlighted for it. Several Gupta sympathisers, including some of the jury members who voted to convict him, saw him as epitomising the American dream — an orphan immigrant who worked his way up the capitalist ladder.
Gupta’s lawyer who is planning to appeal the verdict may well be able to prove that his client hadn’t earned “a dime”' from the alerts he passed on to disgraced hedge-fund owner Raj Rajaratnam. It could be argued that Gupta was merely showing off the knowledge that his position could bring him. Or it could be that he hoped, as some have speculated, that he could get support from Rajaratnam in his own investment ventures. Only Gupta himself will ever know.
By the same token, Gupta, more than anyone else, must know the code of conduct that governs the board of directors at publicly-listed firms. His years at management consultancy McKinsey, where he rose through the ranks, would have taught him that board confidences are rarely spoken of outside the boardroom. Management consultancies thrive on their ability to keep secrets. McKinsey labels itself a “trusted advisor to the world’s businesses, governments and institutions”.
Still, reports suggest that Gupta, one of Harvard’s brightest graduates, missed the point about following rules. A Bloomberg report a year ago said that Gupta, while still a senior partner at McKinsey, ran a side-gig, flouting norms at the consultancy which doesn’t allow its partners to run parallel operations, however small.
The article also said that Gupta co-founded his private equity firm Silk Route Partners two years before the retirement age of 60 at McKinsey. Rajaratnam was very much a part of the operation and that prior to him joining Silk Route his firm had been under investigation and settled a claim with the Securities and Exchange Commission. Two other partners at the venture capital firm too had been previously investigated. Gupta, networked as he was, couldn’t possibly have missed that.
What’s worse, even if Gupta may have glossed over the questionable track record of his partners at the venture he co-founded, he would have been well versed with the power of information. As someone who guided companies on how to grow and manage themselves better, he would know what makes for market-moving intelligence. That’s the kind of stuff that helps investment managers stay in business or lose out. So it would be an insult to Gupta’s acumen to assume that he was too naive to realise the value of his calls to Rajaratnam and the information that he let drop.
Herbert Croly, a leading thinker of the Progressive Movement in early 20th century America and author of the book, The Promise of American Life, which was one of the most widely read political books of its time, argued that, “American history contains matter for pride and congratulation, and much matter for regret and humiliation.”
Gupta’s story, played out a century later, it would seem is quintessentially American.
Anjana Menon is a Delhi-based business writer. You can send your comments to firstname.lastname@example.org