Shock!
Rajat Gupta, one of the top
Indian-American corporate leaders,
is charged with insider trading.
Suman Guha Mozumder reports
Rajat Gupta, quick facts
Amid rising anti-Wall Street senti- ments, Rajat Gupta was charged last week with engaging in an insider
trading scheme with convicted hedge fund
billionaire Raj Rajaratnam, who was sentenced to 11 years in prison last month
(India Abroad, October 21).
The United States Attorney’s office for the
Southern District of New York, headed by
another Indian American, Preet Bharara,
accused Gupta, 62, of inside information
about the earnings, financial performance,
and business transactions of Goldman
Sachs and Procter & Gamble, where he was
a board member.
Gupta surrendered to Federal Bureau of
Investigation agents a few hours before he
was charged by the district attorney
October 26 with a six-count indictment.
According to the indictment filed in the
Manhattan federal court, Gupta and
Rajaratnam maintained a personal and
business relationship. The prosecution
alleges Gupta invested money in at least
two different Galleon funds then headed by
Rajaratnam, and formed separate investment and private equity funds with the Sri
Lankan-born billionaire.
From 2008 through January 2009, the
prosecution alleges, Gupta told Rajaratnam about ‘material, nonpublic information’ that Gupta had learned in his
; Born in Kolkata
PARESH GANDHI
; Alumnus of IIT-Delhi, Harvard Business School
; In 1994, at 45, became first non-US born person to head McKinsey & Company
; On Goldman Sachs and Procter and Gamble boards: Special adviser to the
United Nations
; Advised GE’s Jeffrey Immelt and Henry Kravis of Kohlberg Kravis Roberts &
Company
; One of the founders of the Indian School of Business, Hyderabad
; Allegation against him: Of being the ‘illegal eyes and ears’ of billionaire hedge
fund owner Raj Rajaratnam, who has been sentenced to 11 years in jail for insider
trading
; Pleaded not guilty, released on $10 million bail.
; Trial date set for April 12, 2012
capacity as a member of the Goldman
Sachs and P&G boards — for Rajaratnam
to use the inside information to purchase
and sell securities.
On the basis of that information Rajaratnam earned illegal profits, and illegally
avoided losses of millions of dollars, the
indictment says.
The court documents allege that on the
late afternoon of September 23, 2008,
shortly before the close of the stock market,
Gupta participated telephonically in a
meeting of the Goldman Sachs board during which the board agreed to accept a $5
billion investment by Berkshire Hathaway,
a multinational holding company.
‘Approximately 16 seconds after Gupta
disconnected his phone from the Goldman
Sachs Board call, at approximately 3:54
pm, his assistant called Rajaratnam and
shortly thereafter, connected Gupta to the
call. Just two minutes before the close of
the market, Rajaratnam caused certain
Galleon funds to purchase approximately
217,200 shares of Goldman Sachs common
stock at a total cost of approximately $27
million,’ the indictment alleges. ‘Following
the close of the market on September 23,
2008, Goldman Sachs publicly announced
the investment by Berkshire Hathaway.
The next morning, Goldman Sachs’s stock
opened for trading at a price that was more
than $3 per share higher than the preannouncement closing price on September
23, 2008,’ according to the indictment,.
The prosecution also notes other phone
conversations between Gupta and Raja-
ratnam on different dates and times to but-
tress its argument that the two were in
cahoots.
