Rajat Gupta's Role in the Galleon Insider Trading Case

14 March 2016
Rajat Gupta, the former global head of McKinsey, was found guilty of passing on confidential information from Goldman Sachs board meetings to Rajaratnam.
shannon stapleton / reuters
Rajat Gupta, the former global head of McKinsey, was found guilty of passing on confidential information from Goldman Sachs board meetings to Rajaratnam.
shannon stapleton / reuters

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.

Nilita Vachani Nilita Vachani is a documentary film-maker, writer and educator who lives in New York.

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