The high-profile insider-trading trial of former McKinsey head, Mr Rajat Gupta pitted him against another Indian-American New York’s top federal prosecutor Mr Preet Bharara, who in the end walked away winning his battle against corporate America’s poster boy.
Mr Gupta, 63, is one of most prominent Wall Street executives in a list of 66 traders against whom Mr Bharara has led a legal battle. Of these 66 people who were charged with insider-trading crimes since 2009, by Mr Bharara, 60 have either pleaded guilty or have been found guilty.
The insider-trading trial, which began on May 21, had set the stage for a courtroom showdown between the two India-born and Harvard educated US citizens who are prominent figures in the South Asian community here. Kolkata-born Gupta’s rise in corporate America had been stellar and enviable, while, Ferozepur-born Bharara was named by TIME magazine earlier this year as one of the 100 most influential people in the world.
Orphaned at 18, Mr Gupta received an engineering degree from the elite Indian Institute of Technology. He earned a scholarship to Harvard Business School, graduating top of his class and securing a coveted posting at McKinsey. He went on to being elected at age 45 to run McKinsey, becoming the first non-American-born executive to head the consulting giant.
“I know consensus says McKinsey is white and traditional, but I am testimony to the fact that image isn’t true,” said Mr Gupta, in a 1994 profile in The Chicago Tribune. “If anything, it’s a meritocracy.”
Mr Gupta also sat on the boards of some of the most prestigious Wall Street firms including Goldman Sachs, consumer-giant Proctor and Gamble and AMR, the parent of American Airlines. The Former Secretary General of the United Nations, Mr Kofi Annan, had appointed Mr Gupta as an advisor to the international organization on management reform and the Rockefeller Foundation named him a trustee.
Mr Gupta’s conviction on three counts of securities fraud and one count of conspiracy after a month-long trial in Manhattan Federal Court will go down as a red letter day for Mr Bharara, who had on a couple of occasions sat quietly on the last bench of the courtroom and watched the proceedings against his fellow Indian.
Mr Bharara, US attorney for the Southern District of New York had not minced words last October when the charges were filed against Mr Gupta and said the top Wall Street executive was “entrusted” by some of the premier institutions of American business to sit inside their boardrooms and receive their confidential information so as to provide beneficial advice to the shareholders.
“As alleged, he broke that trust and instead became the illegal eyes and ears in the boardroom for his friend and business associate, Raj Rajaratnam, who reaped enormous profits from Mr Gupta’s breach of duty,” Mr Bharara said.
After the guilty verdict was announced against Mr Gupta on friday, Mr Bharara commented, “Mr Gupta achieved remarkable success and stature, but he threw it all away”.
“Rajat Gupta once stood at the apex of the international business community. Today, he stands convicted of securities fraud. Having fallen from respected insider to convicted inside-trader, Gupta has now exchanged the lofty boardroom for the prospect of a lowly jail cell.
“Violating clear and sacrosanct duties of confidentiality, Gupta illegally provided a virtual open line into the boardroom for his benefactor and business partner, Raj Rajaratnam,” Mr Bharara said in a statement.
Mr. Bharara added that almost two years ago, his office said that insider-trading is rampant, and Mr Gupta’s conviction “puts that claim into stark relief.”
“It bears repeating that... we will continue to pursue those who violate the securities laws’, regardless of status, wealth, or influence,” he said.
For Mr Gupta, it has been a stunning fall from grace as the charges were announced against him on October 26 last year, a day when Diwali was being celebrated across the world.
It comes as an irony that Diwali, the day Mr Gupta was arraigned in court on charges brought by Mr Bharara’s office, is celebrated to mark the triumph of good over evil.
Mr Bharara, nominated to become US Attorney by the President Mr Barack Obama on May 15, 2009, has led a widespread crackdown on insider-trading on Wall Street.
As a prosecutor in the Southern District, he has prosecuted organised crime, narcotics and securities fraud.
During his tenure as US Attorney, the office has prosecuted several international terrorists, and secured life sentences for Times Square bomber, Faisal Shazad and Ahmed Ghailani, Al-Qaeda associates who were responsible for the mass murder of innocents at the US Embassies in Kenya and Tanzania.
Mr Bharara grew up in New Jersey’s Monmouth County and earned degrees from Harvard and Columbia Law School.
During Mr Rajaratnam’s trial, Mr Bharara would quietly enter the courtroom and take a seat in the last row of the gallery like he did in Mr Gupta’s trial.
“His consistent presence at the largest insider-trading case in a generation -- and the office’s resounding victory -- signaled that the chief federal prosecutor in Manhattan was back as the sheriff of Wall Street,” the New York Times quoted.
Mr Bharara has repeatedly stressed his office’s role in pursuing corporate crime with the landmark insider-trading case, which relied on aggressive prosecutorial methods and unprecedented tactics.
For the first time, federal authorities used wiretaps to listen in on stock traders swapping illegal tips.
When Mr Rajaratnam was sentenced to 11 years in prison on October 11, Mr Bharara’s stern message was that privileged professionals do not get a “free pass” to pursue profit through corrupt means.
“The message is the same for everyone no matter who you are or how much money you have—obey the law or face the fate of those who don’t.”
Mr Bharara said, “Mr Rajaratnam’s sentencing is a sad conclusion to what once seemed to be a glittering story. We can only hope that this case will be the wake-up call we said it should be when Mr Rajaratnam was arrested.”