Tag Archive for 'Rajat Gupta'

Rajat Gupta’s phone call: by Sandipan Deb

In Mint, a chapter from ‘Fallen Angel’, Sandipan Deb’s new book on the rise and fall of Rajat Gupta. [Sandipan has two books out in the market in one month. The other book is on Mahabharata set in Mumbai's underworld.]

The only phone conversation between Rajaratnam and Gupta that the US government was able to tap took place in the early evening of 29 July 2008. It lasted eighteen minutes. The conversation is, to say the least, revealing. Gupta sounds unsure and confused at times, and is looking to his friend for career advice. He is also lobbying for a bigger role in the Galleon Group—and more money.

It is obvious from the conversation that Gupta is well aware that his long-time protégé, and McKinsey employee, Anil Kumar, is working on the sly for Rajaratnam and is getting paid for it. Gupta has now been retired from McKinsey for about a year, but the conversation implies that it is very likely he knew about the arrangement between Rajaratnam and Kumar while he was still working at the firm.

After the usual pleasantries, Rajaratnam, who is suffering from a cold, mentions that he has called because he is meeting Gary Cohn, president and chief operating officer of Goldman Sachs, in two days, then goes on: “And there’s a rumour that Goldman might look to buy a commercial bank.” Gupta is initially non-committal, but Rajaratnam asks him point blank: “Have you heard anything along that line?” He mentions Wachovia, at that time the fourth-largest bank holding company in the US in terms of assets, but in deep trouble. More:

The Outsider

Suketu Mehta, journalism professor and Maximum City author, interviews Raj Rajaratnam in Newsweek. From The Daily Beast:

Raj Rajaratnam

It was 6 a.m. on Oct. 16, 2009, and Raj Rajaratnam, head of the Galleon Group hedge fund, was at home on his exercise bike looking out over Manhattan’s Turtle Bay, thinking about how many shirts he would have to pack for his trip to England that day. He was to go there to launch a $200 million fund to invest in the Sri Lankan stock market, in which he, the richest Sri Lankan on the planet, was the biggest single investor.

At 6:30 his doorbell rang. He answered it to find a number of policemen and men in suits outside. An FBI agent named B. J. Kang told him he was under arrest for insider trading. There were five other agents with him, come to collect Rajaratnam. They asked if he had a gun, if he had drugs on the property. For a moment he was afraid they would plant something.

As they led him away from his family, Rajaratnam says Kang told him, “Take a good look at your son. You’re not going to see him for a long time.” He added, for good effect, “Your wife doesn’t seem so upset. Because she’s going to spend all your money.”

The interrogation, at the FBI office in lower Manhattan, lasted eight hours. They put a laptop in front of him and pressed a button. He heard the voice of his wife picking up his home phone. “Hello?” Then they clicked on another button and his voice came on, on his cellphone, talking to his Wharton classmate and friend Anil Kumar, discussing business matters at McKinsey, where Kumar worked. On the same day, Kumar and another Wharton classmate, Rajiv Goel, were charged with insider trading.

Two FBI agents, wearing prominently displayed guns, played good cop, bad cop. They thumped tables, jumped up and down, told him, “Just say you did it to one count!” But the suspect—who chose not to call a lawyer—was uncooperative. “In my head I was saying, ‘You can’t intimidate me! I’m from Sri Lanka’?”—where prisoners have to deal with much worse. They wanted him to turn in other hedge-fund managers. They wanted him, especially, to wear a wire and tape his conversations with Rajat Gupta, the former CEO of McKinsey. Gupta, whom Rajaratnam refers to as a “first-class guy,” was the most respected Indian executive in the U.S. More:

The modern face of insider trading

The sentencing of Raj Rajaratnam for insider trading marks the denouement in an extraordinary fall from grace. In Wall Street Journal, Susan Pulliam and Chad Bray have the story.

Raj Rajaratnam’s remarkable journey from Sri Lanka to the heights of the hedge-fund world to felon ended Thursday when he was sentenced to 11 years in prison, the longest-ever term imposed in an insider-trading case.

In a defining moment for the government’s campaign to stamp out what it describes as rampant illegal trading on Wall Street, U.S. District Judge Richard Holwell in New York said during sentencing that the billionaire investor’s crimes “reflect a virus in our business culture that needs to be eradicated.” The judge also ordered Mr. Rajaratnam, who was convicted of securities fraud and conspiracy in May, to pay a $10 million fine and forfeit $53.8 million. The defense plans an appeal. more

The Raj trial and Wall Street’s South Asian elite

The trial of hedge-fund billionaire Raj Rajaratnam has riveted the financial world and shined a light on the phenomenal success and insularity of the Indians, Pakistanis, Bengalis, and Sri Lankans flooding the American financial sector, writes Gary Weiss in The Daily Beast:

Following every financial collapse, a cast of Wall Street bad guys invariably parades through the dock, from Depression-era thief Richard Whitney to junk-bond king Michael Milken to Ponzi schemer Bernie Madoff—media-saturated jaunts down the Via Dolorosa calculated to reassure the public that the financial markets are being policed, even though they’re not. This week, it’s the somber, bespectacled, self-made billionaire Raj Rajaratnam on display, as the biggest insider trading trial in decades heads to the jury.

Rajaratnam was not a player in the 2008 financial crisis. Like Madoff, he’s a kind of consolation prize, a distraction from the fact that none of the meltdown’s central figures have even been indicted. But as the trial has made clear over the past six weeks, he represents even more: the living embodiment of a changing Wall Street—not in its immorality, which is a permanent fixture of finance, but in its ethnicity. Wall Street is no longer a white-man’s preserve. South Asians—Indians, Pakistanis, Bengalis, and Sri Lankans—are ascendant.

This new South Asian Wall Street elite includes the CEO of Citigroup, Indian-born Vikram Pandit; Ajit Jain, also from India, a money manager emerging as the likely successor to investment guru Warren Buffett; and a half-dozen hedge-fund managers who use strategies based on mathematical algorithms to routinely rake in $50 million or more per year in income. Chief among the latter group is the Sri Lankan-born Rajaratnam, who ran a $7 billion hedge fund, Galleon Group, and largely to the disgust of this justifiably proud community, has emerged as the face of this new ethnic order.

In much the same way that the upwardly mobile Jewish community of the 1930s viewed Jewish gangsters as a “shanda fur die goyim” (shame before the gentiles), the “Raj trial” has put the South Asian financial clique on full display, for all its success—and insularity.

Over the past weeks, jurors have heard testimony from Anil Kumar, an old college buddy and former McKinsey executive who pleaded guilty to getting $2 million from Rajaratnam in return for inside information; Rajiv Goel, a former Intel executive who also pleaded guilty and now says he fed Rajaratnam tips about his old employer; and another witness who says Rajaratnam’s brother, Rengan, hastily removed office files the day the Feds started making arrests. Even the prosecutor, steely Preet Bharara, who made his bones ferreting out the firing of U.S. prosecutors who refused to pursue political cases for the Bush administration, is Indian-born. More:

Lessons in Rajat Gupta’s phonecall

Shoba Narayan in Mint:

Why would a person who has spent a lifetime and a stellar career keeping client confidences break off from a board meeting to make a call to a hedge fund manager? If it was a misstep, could he have somehow intuited it and stopped himself? Perhaps he was simply returning a phone call that he didn’t need to at that moment? Could he have realized that his mind was playing perverse tricks on him; that he was making avoidable mistakes?

Is Rajat Gupta culpable? That’s for the US federal court to decide in the highly watched insider trading case against the billionaire founder of the Galleon Group, Raj Rajaratnam. The word on the street is that Gupta may have been guilty of “over-socializing”, but nothing more. The more interesting question is this: Why now? Why did this happen to Gupta now, after retirement, especially since, as he has said, he spent a career being discreet? As Gupta wrote in his impassioned letter to the dean of the Indian School of Business (ISB), which he co-founded: “I have spent my entire professional career zealously guarding the confidences of my clients. There is no reason for me to suddenly deviate from a lifetime of probity and honour.” More: