Rajat Gupta, who had reached the pinnacle of corporate America as the managing partner of McKinsey & Co and as a director at Goldman Sachs Group and Procter & Gamble, was convicted by a federal jury of leaking inside information to hedge-fund manager Raj Rajaratnam.
Gupta, 63, was found guilty of securities fraud and conspiracy by a federal jury in Manhattan today in its second day of deliberations. The trial began on May 21. Securities fraud carries a maximum prison sentence of 20 years. Conspiracy carries a five-year maximum prison sentence. He will remain free on bail until his sentencing on October 18.
Gupta showed no reaction while the verdict was read. The verdict is a victory for the office of Manhattan US Attorney Preet Bharara and the Federal Bureau of Investigation that used tools normally employed against organised crime, including phone taps and informants, .
“Having fallen from respected insider to convicted inside trader, Gupta has now exchanged the lofty board room for the prospect of a lowly jail cell,” Bharara said in a statement. “Violating clear and sacrosanct duties of confidentiality, Gupta illegally provided a virtual open line into the board room for his benefactor and business partner, Raj Rajaratnam.”
Gupta is the most prominent of those convicted at trial or to plead guilty since the nationwide crackdown began in October 2009. To date, the US has brought cases against 66 traders and their sources from Wall Street to Silicon Valley. No one has won an acquittal; six cases are pending.
Besides his tenure at Goldman Sachs and McKinsey, which he ran from 1994 to 2003, the Kolkata-born Gupta served on the boards of the Rockefeller Foundation and the Bill & Melinda Gates Foundation. He is also a co-founder of the Indian School of Business in Hyderabad.
He has raised millions for education and health-care programs, served as an adviser to the UN and counselled CEOs, including Lloyd Blankfein of Goldman Sachs, who was a prosecution witness at the trial. He lives in a waterfront home in Connecticut. “It’s an extremely significant conviction,” Richard Scheff, chairman of Philadelphia-based Montgomery, McCracken, Walker & Rhoads LLP, said in an interview before the verdict was handed down. “It doesn’t get much higher. The conviction sends the message that no one is off limits,” said Scheff, who specialises in white-collar criminal investigations.
