Embroiled in the insider trading proceedings before the United States Securities and Exchange Commission (SEC), former managing director of McKinsey & Co and director of Goldman Sachs, Rajat Gupta today offered to be relieved of his responsibilities as chairman of the governing and executive boards of the Hyderabad-based Indian School of Business.
Gupta has resigned from boards of various entities following an administrative action filed against him by the SEC on March 1. These include the private equity group New Silk Route, of which he was the founding general partner and chairman; Public Health Foundation of India and the Hyderabad-based Emergency Management & Research Institute (EMRI), where he was a director.
Gupta is a co-founder of the ISB and had been on its board since its formation in 2001. "Way back in 1995, when the idea of this school was conceived, the ISB was just a dream," Gupta had said at its fifth anniversary in December 2006."For McKinsey, where I come from, ISB is the largest source of young talent among all the schools in India," he had said.
Five years later, on the 10th graduation day of his dream project, Gupta's resignation comes up for a decision. According to an ISB statement today, a decision on the matter would be taken at the board meeting scheduled for April 2.
It said: “Rajat Gupta has requested the ISB executive board to relieve him of his board responsibilities till his pending matter with the US SEC is resolved. This, and the appointment of the new chairman, will be tabled at the upcoming board meeting on April 2."
This contrasts with the "confident" note the B-school's management struck immediately after news broke about SEC's proceedings against Gupta. In a statement on March 2, the ISB said: "We note that the US Securities and Exchange Commission has initiated administrative and civil proceedings against our Chairman, Rajat Gupta. We also note the statement of the counsel for Gupta, which asserts that the allegations are totally baseless. The ISB community is confident that Gupta will be vindicated. He continues to be the chairman of the ISB executive board."
The SEC has made three allegations against Gupta that relate to the time he served as a Goldman Sachs board member during November 2006 to May 2010. He has been accused of tipping off hedge fund Galleon's Raj Rajaratnam about Berkshire Hathaway's $5-billion investment in Goldman and its upcoming public offer before it was announced; illegally disclosing information about Goldman's positive quarterly results for the second quarter of 2008; and giving confidential information about Goldman's impending negative results for the fourth quarter of 2008 to Rajaratnam.
Gupta has since filed a complaint in a Manhattan federal court arguing that the SEC's choice of an administrative action, instead of a lawsuit, deprives him of a jury trial that allows exchange of evidence with the government.
