On 11 March 2016, Rajat Gupta, the former managing director of the global consulting firm McKinsey was released from prison after serving a two-year sentence for insider trading. At the time of his arrest in 2010, Gupta was one of the best known white-collar American professionals of Indian origin. He had had a stellar corporate career at McKinsey, and also served as a board member for a number of major corporations, including American Airlines, Procter & Gamble and Goldman Sachs. He had also, along with Anil Kumar, a senior partner at McKinsey, helped set up the Indian School of Business in Hyderabad, and worked closely with a number of philanthropic ventures, including the Global Fund to Fight AIDS, Tuberculosis and Malaria. In 2012, a jury found Gupta guilty of passing confidential information from Goldman Sachs board meetings to Raj Rajaratnam, the CEO of the Gallion Group, a multi-million dollar hedge fund, who traded on and profited from it.
In her November 2015 cover story, 'Inside Job,' Nilita Vachani looked into the illegal trading network built by Rajaratnam, Kumar and Gupta, and the story of the woman who was sacrificed by the prosecutors in order to secure their convictions. In this excerpt from the story, Vachani recounts Gupta's role in the illegal affair.
In 2011, two years after his arrest, following a two-month trial in which Kumar was a key witness, a 12-member jury found Rajaratnam guilty on all the 14 counts of securities fraud and conspiracy on which he had been charged. The court found that Rajaratnam had repeatedly conspired to obtain privileged information from a variety of highly placed insiders in banks, corporations and technology firms, and had traded using that information to maximise profits and prevent losses.
Prosecutors also trained their guns on a far more illustrious target: Rajat Gupta, the former global head of McKinsey, who was then probably the best known and most respected American white-collar professional of Indian origin. Gupta had had a stellar corporate career at McKinsey, and also served as a board member for a number of major corporations, including American Airlines, Procter & Gamble and Goldman Sachs. He had also—along with Anil Kumar—helped set up the Indian School of Business in Hyderabad, and worked closely with a number of philanthropic ventures, including the Global Fund to Fight AIDS, Tuberculosis and Malaria. In 2012, a jury found Gupta guilty of passing confidential information from Goldman Sachs board meetings to Rajaratnam, who traded on and profited from it. As with Rajaratnam, Kumar’s testimony was crucial in convicting Gupta, too.
Rajaratnam was sentenced to 11 years for his crimes, while Gupta was sentenced to two. Both men are currently serving their sentences at the same facility, a minimum-security prison in Ayer, Massachusetts.
Kumar got off with a probation period of two years and a fine of $25,000, apart from forfeiting the $2.26 million that was calculated to be his illicit gain. Prosecutors had pitched in heavily in his support, describing his cooperation as “absolutely essential in two of the most important securities fraud trials in history.” Other conspirators also cooperated or settled with the authorities and were spared jail terms.
The Rajaratnam case was a prominent, early win in a streak of more than 80 successful prosecutions against insider trading led by Preet Bharara, the US attorney for the southern district of New York. Bharara’s aggressive pursuit of these cases bolstered his reputation as a no-nonsense defender of the public good. He was catapulted into the national limelight, and onto the cover of Time magazine.
But as careers were made and shattered in the courtrooms, Manju Das, Kumar’s housekeeper, was forgotten. In November 2009, a few weeks after Kumar’s arrest, his family terminated her employment and sent her back to India. After more than a decade of earning a relatively stable income in the United States, she was cast back into a life of crushing poverty in rural West Bengal.
Rajaratnam and I were close friends through the 1980s and the 1990s. I met him in the fall of 1981, when we were both studying at the University of Pennsylvania. I was a graduate student at the Annenberg School for Communication, while he, Anil Kumar and another future informant, Rajiv Goel, were enrolled in the MBA programme at the Wharton School. We stayed in touch afterwards, but eventually lost contact. The news of his arrest in 2009 came as a jolt.
In 2011, I began attending Rajaratnam’s trial, driven by curiosity about his fate. When Manju Das’s name came up in court, however, I was transformed from a curious bystander to someone deeply invested in a secondary tale. The documents unearthed after Kumar’s arrest in 2009 offered an extraordinary glimpse into how a millionaire brazenly stole the identity of his incalculably less privileged housekeeper, and exploited it to his own ends.
In a wiretap recording of a call between Rajaratnam and Rajat Gupta in 2008, the Galleon CEO boasted that he had been giving Kumar “a million dollars a year for doing literally nothing,” and that the payments had been going out “for the last three or four, I mean, four or five years … after taxes, offshore cash.” Gupta responded, “I know. I think you’re being very generous.” Apart from suggesting that Gupta—who was a “senior partner emeritus” at McKinsey at the time—knew Kumar was on Rajaratnam’s payroll, this conversation also offers a glimpse into what Manju Das might once have been worth.
For a few days of the trial, Das’s name ricocheted between the prosecution and defence, each seeking to use it to their own ends. Kumar claimed that it had been Rajaratnam’s idea to make payments in her name, while Rajaratnam’s defence maintained that he knew nothing about Kumar’s use of his housekeeper’s identity. The defence also attempted to discredit Kumar by claiming that he had used proxies to receive payments in the past. It produced a consultancy agreement from Mindspirit, a company Kumar and Gupta started together while they were both employees of McKinsey. Rajaratnam’s lawyers claimed that as part of this agreement, Kumar had received compensation in the name of his wife, Malvika, while Gupta had received payment in the name of a family trust.
At one point, the question arose of whether Manju Das herself should have been part of the investigation. During a cross-examination, John Dowd, Rajaratnam’s lead defence lawyer, asked Kumar if he had sent Das back to India after he was arrested and charged. Kumar replied that she had long wanted to go, but that her return was hastened after his arrest because his “life was in such trauma.” “Did you make her available to be interviewed by the FBI?” Dowd asked. “I was not asked, sir,” Kumar replied. Dowd persevered: “Well in light of what we’ve reviewed over the past day or so, she is an important witness in this case, isn’t she?” At this, a prosecution lawyer raised an objection, which was sustained by the judge.