Mother Teresa or Dr Faustus?

Mind without Fear

Rajat Gupta

Juggernaut Books; 342 pages, Rs 699

“If Mother Teresa were charged with bank robbery, the jury would still have to determine whether or not she committed a bank robbery.”  That quip by Federal Judge Jed Rakoff at the 2012 trial of Rajat Gupta, a former Managing Director of the global consulting gold standard McKinsey and Company for insider trading, is an accurate summary of what Mr Gupta says in his defence in the new book.  

Warren Buffet agreed to invest $ 5 billion in Goldman Sachs on September 23, 2008 at the height of the subprime crisis.  Mr Gupta, who was then on the Board of Directors of Goldman, learnt of this through a conference call among the directors.  Minutes afterwards, he telephoned Raj Rajratnam, the prime mover of Galleon, a hedge fund, who bought 350,000 Goldman shares just before the market closed.  Galleon gained handsomely from this trade when the news broke the next day.

Mr Rajratnam was prosecuted for insider trading and convicted in 2011 with an 11-year jail sentence.  Mr Gupta’s links with Mr Rajratnam were also under surveillance.  Although the above call appeared on the list, there was no record or transcript.  In May 2012, Preet K Bharara, then the United States Attorney for the Southern District of New York, charged Mr Gupta with passing privileged inside information that led to the criminal trial.  Mr Gupta was convicted and awarded a two-year prison term, which he served from July 2014 to January 2016.  His last appeal was turned down in January 2019.

Mr Gupta’s present defence, which he claims is in place of the testimony he should have offered in the trial, but did not, on the advice of his legal team.  He knew Mr Rajratnam and had a venture capital fund going with him.  He says that this deal duped him out of $ 10 million.  His calls to Mr Rajratnam were for recovering this money.  He claims that there was no quid in the form of financial gain for the quo of supplying inside information.  He admits to “judgmental errors” that allowed things to reach the tipping point: trusting Anil Kumar, a protégé in McKinsey who was in cahoots with Mr Rajratnam, Mr Rajratnam himself, Ravi Trehan, a friend who was also involved with the venture capital fund and tipped Mr Gupta off about Mr Rajratnam’s underhand ways (but did not come to Mr Gupta’s defence in the trial), McKinsey which revoked his privileges as a former head, Lloyd Blankfein, the managing director of Goldman whose testimony may have damaged the Gupta case beyond repair, Gary Naftalis, his chief counsel who advised against testifying, Judge Rakoff for his often unpredictable ways are all in the list among many others.  The only ones Mr Gupta trusts absolutely are his wife and his four daughters.

Mr Gupta says his fateful September call to Mr Rajratnam, which was in a gap in a busy schedule, was about the money he was owed.  Why would he tip off someone with whom he had an ongoing dispute?  All the other pieces of evidence offered by the prosecution were purely circumstantial.  And there was no money trail.

Finally, the Mother Teresa defence.  Mr Gupta’s exceptional career, his leadership of McKinsey, his network of associates which was virtually a who’s-who of global business and above all, his many charity and community initiatives, are all part of his case.  The judge forbade naming them at the trial, but the book is overflowing with them.

How does this all add up?  Not to a hill of beans, to this reviewer.  First, the key call.  Immediately after you hear of what is absolute bombshell news, do you call about your long-running dispute in a routine manner?  Are you not inclined to use this as leverage to extract your payment?  If we accept his claim of lapses of personal judgment, we must wonder how one with such a glaringly poor record of evaluating characters rose to the top of the consulting tree.  Mr Gupta’s insinuation that the US Justice Department and the SEC wanted a headline-snaring case following the 2008 meltdown also sounds thin.  Mr Bharara, despite his penchant for grandstanding, was not under any extraordinary pressure in 2012, four years after the event, to snare a big fish.

That leaves us with Mother Teresa.  This is the whole point of this extremely manipulative book.  No heartstring is too delicate for Mr Gupta to pluck.  Page after page we are treated to his family history – early deaths of his parents, his indomitable spirit, his hard work, his achievements, his popularity among the high and mighty, sometimes even repeatedly.  He contrasts this with the conditions in the low-security prison and refers frequently to the Bhagwadgita as the source of his solace.  Although he does not say so in so many words, it is evident that he expects the reader to think of him as the sthitapragnya (the ultimate stoic) the scripture defines.

Mr Gupta claims that he has read many articles that appeared about the case and himself.  But that list does not include George Packer’s 11,000 word essay “The Dirty Business” in The New Yorker in 2011, nor articles by Anita Raghavan in The New York Times or her later book as well as the Deb treatise.  He makes no mention of Duff McDonald’s masterly chronicle of McKinsey, The Firm (reviewed in these pages, October 5, 2013).  This last calls him a “bad fish.”  Mr McDonald says Mr Gupta’s rise in the firm was far from spectacular,  In his 21 years at McKinsey, Mr Gupta contributed exactly zero articles to the firm’s treasured knowledge bank.  Among the many sins of commission and omission Mr McDonald lists, the chief ones are excessive concern with incomes, questionable selection of clients, acceptance of equity in clients as part payment, and a disproportionately large share of failures – in other words, the reversal of most of the vaunted McKinsey values.  

So the enigma persists: As Judge Rakoff asked in sentencing order, “Why did Mr Gupta do it?”  Was it simply a case of feeling “frustrated at not finding new worlds to conquer?” 

Mr Gupta was an outsider to the power elite, a welcome one, but an outsider nonetheless.  People, including prime ministers and former presidents listened to him politely and often with interest, but he had no way of knowing whether they would follow up on what he said.  One sure way of ensuring that was to back up his advice with resources which would lead to actions he desired.  That was not possible with his own fortune.  He had a fair idea that this is what he wanted to do when he started the New Silk Route investment fund, but that was not adequate.

This is where the smiling Mephistopheles, Mr Rajratnam, enters the picture.  Galleon was a large hedge fund and Mr Rajratnam was already in the most-influential lists, not because of the brilliance of his mind, but because of the money he controlled.  That was the hook for Mr Gupta.  The main focus of a 2008 conversation between them was the very real possibility that Mr Gupta would be the chairman of Galleon International, which could enter India with a $ 10 billion corpus in 2010.  

If Mr Gupta were to return to India in 2010 with $ 10 billion of Galleon’s own funds, he would have been not just a wise man offering good advice, but a real builder.  That would earn him a life-membership in the club he probably desired most.  It was always India that was his reference point.  And Mr Rajratnam was the only one that could make this happen.  So other slights, and the loss of money on the venture fund they floated together, were not material.  

The power motive is possibly what Judge Rakoff meant when he said that “Gupta, though not immediately profiting from tipping Rajratnam, viewed it as an avenue for future benefits, opportunities and even excitement.”  The last word is the crucial one.

Goethe’s Faust is redeemed from Hell, because a chorus of angels and Virgin Mary support him and because the act he had promised to commit was only half done.  In Mr Gupta’s case, another of the poet’s observation is more appropriate: “The deed is everything, its repute nothing.”

And finally, about the timing and the real motivation behind the book.  Mr Gupta has had ample time to convince himself that he has been grievously misjudged and it is never too late to set right the injustice.  If this was the testimony his lawyers prevented him from offering at the trial, they did him a favour.  It would not have withstood a halfway competent cross-examination.

“As a rule, I have found that the greater brain a man has, and the better he is educated, the easier it has been to mystify him,” Harry Houdini once said to Arthur Conan Doyle.  They don’t come brainier and better educated than Rajat Gupta!