Rajat Gupta's seemingly story-book life has been derailed by a conviction on charges of securities fraud
By T.E. | NEW YORK
GIVEN the tortured and time-consuming deliberations that can accompany white-collar criminal charges, the jury in the Rajat Gupta case moved with breathtaking speed. Only a day after receiving instructions from the judge, they convicted Mr Gupta on four out of six counts of conspiracy and securities fraud, all linked to information gleaned from his position as a board member of Goldman Sachs that was passed on to Raj Rajaratnam, a hedge-fund manager found guilty last year of insider trading in a separate trial.
The jury's verdict provides a stunning denouement to Mr Gupta's career. After immigrating from Kolkata as a young man, he joined McKinsey & Company, a consulting firm. He would go on to become the firm's managing director, and serve on the boards and advisory panels of many of America's most prestigious investment firms, corporations, universities and philanthropies.
Underlying the convictions were two key events in 2008. The first concerned Goldman's receipt of a $5 billion life-line from Warren Buffett's Berkshire Hathaway during the heat of the financial crisis. The other involved the jarring losses Goldman would endure in subsequent months. Mr Gupta was found to have tipped Mr Rajaratnam to both pieces of confidential information. But the jury dismissed charges tied to two other events, related to positive earnings by Goldman in 2007, and a deterioration in results for Procter & Gamble, on whose board Mr Gupta also sat, in 2009. According to comments by one of two jurors who agreed to discuss the case, there was credible evidence to support at least one of the dismissed charges, but not enough to convict.
Mr Gupta, as has been his manner throughout the case, was stoic after hearing the verdict. His four daughters and wife, however, wept and surrounded him in a collective embrace.
Sentencing will be October 18th. Mr Gupta faces potential prison terms of up to 20 years on three counts of securities fraud and five years for a single count of conspiracy, but the legal battle is far from over. “This is only round one,” said Gary Naftalis, Mr Gupta's attorney, adding that his client "didn't receive a dishonest dime". Motions will be submitted to set aside the verdict with an appeal to follow if those fail. Of particular importance will be the admission into testimony of three wire taps of Mr Rajaratnam that had inferential value but were not directly demonstrative of the actions at the heart of the case.
In one of the wire taps, Mr Rajaratnam says he had heard “something good” about Goldman from one of its directors. In another, he says “somebody who's on the board” of Goldman provided information about upcoming earnings. Mr Naftalis's comments indicated he will try to have both thrown out on the basis that they are hearsay. Another of the wire taps, recorded on July 29th, 2008, appeared to show Mr Gupta providing Mr Rajaratnam with non-public information, in this case a possible acquisition of AIG. But no subsequent action was taken, and there was no allegation that Mr Rajaratnam traded on the information. This disclosure, said a juror, "didn't tip the balance, but it was an important part" of the evidence that was heard.
Much of the trial featured mind-numbing recitations of phone and trading records. Various executives explained that information heard by boards was indeed confidential, and should not be shared with the public. To this dry factual base, the prosecutors added descriptions of discussions between Mr Gupta and Mr Rajaratnam, followed by frantic, lucrative trading at Galleon. “It was too coincidental,” said a juror.
Still, even with these sentiments, the jurors said reaching a verdict was not easy. There were questions about what motive a man as successful as Mr Gupta might have, given his position and wealth. Ultimately, there was a sense that there were benefits to be had, notably for the creation of a new business venture in which Mr Rajaratnam was to play an important role.
In coming to their verdict, the jurors said they had to surmount strong feelings of warmth for Mr Gutpa, due in no small part to his wife and daughters who sat behind the defendant. “He's a man who came to this country and became a wonderful example of the American dream, a story-book life, with a family whose support looked to be based on respect, love and honour,” said one. His colleague added, “We wanted him to walk.”
