Washington,
October 25, 2012
Rajat Gupta handed two-year
jail term
Narayan
Lakshman
AP Former
Goldman Sachs director Rajat Gupta leaves federal court in New York. File photo
TOPICS
Rajat
Gupta (63), the former Goldman Sachs Director and McKinsey and Company Managing
Partner convicted of supplying confidential information to jailed hedge fund
boss Raj Rajaratnam, received a two-year jail term from U.S. Judge Jed Rakoff,
even as one of the most spectacular insider-trading cases on Wall Street since
the financial crisis of 2008 drew to a climax. He was also ordered to pay a
fine of $5 million.
In June
2012 a jury convicted Mr. Gupta on four criminal felony counts of conspiracy
and securities fraud related to his passing on material non-public information
on Goldman Sachs to Mr. Rajaratnam, who is himself currently serving out an
11-year jail term.
While
some raised eyebrows at the length of the prison term, Judge Rakoff said that
Mr. Gupta was “a good man,” and that his court “has never encountered a
defendant whose prior history suggests such an extraordinary devotion, not only
to humanity writ large, but also to individual human beings in their times of
need.” Yet he added, “But the history of this country and the history of the
world is full of examples of good men who did bad things.”
In a
formal statement in court Mr. Gupta said, “The last 18 months have been the
most challenging of my life since I lost my parents as a teenager... I regret
terribly the impact on my family, friends and institutions that are dear to
me.”
Charges
specifically stemmed from allegations that Mr. Gupta placed a call to Mr.
Rajaratnam after learning that Goldman Sachs had approved a $5-billion
investment by Warren Buffett’s Berkshire Hathaway Inc. As part of its crackdown
on impropriety on Wall Street the U.S. Justice Department pressed the case
against the Kolkata-born graduate of Harvard Business School since October last
year and he is one among 23 individuals who faced criminal charges in
connection to Mr. Rajaratnam’s Galleon Hedgefund.
While
prosecutors in the case, led by Indian-American U.S. Attorney Preet Bharara,
argued for a minimum of ten years in prison for Mr. Gupta, defence lawyer Gary
Naftalis asked Judge Rakoff for probation and leniency, noting that Mr. Gupta
was willing to shoulder a community service sentence in rural districts of
Rwanda entailing work with local healthcare programme to combat HIV, malaria,
poverty and food insecurity.
After
sentencing Mr. Bharara said, “Rajat Gupta now must face the grave consequences
of his crime - a term of imprisonment. His conduct has forever tarnished a
once-sterling reputation that took years to cultivate. We hope that others who
might consider breaking the securities laws will take heed from this sad
occasion and choose not to follow in Gupta's footsteps.”
Defence
lawyers also noted that a lengthy prison sentence would undermine Mr. Gupta’s
support for new development initiatives, such his work with the Urban Institute
of India, aimed at bringing “the private sector, academia and the Indian
government together to address accelerating migration to India's cities.”
In
issuing his sentence the judge may have assigned weight to the fact that Mr.
Gupta reportedly did not gain personally in terms of material benefit, from
tipping off Mr. Rajaratnam during a phone call shortly after a Goldman board
meeting. Mr. Rajaratnam, contrarily, was said to have made $75 million off the
trades he made based on the information gleaned from Mr. Gupta.
Mr. Gupta,
who may have the option to request permission to remain out of prison until his
case is heard by the Second Circuit Appeals Court for New York‘s Southern
District, also received close to 400 letters of support from high-profile
associates praising his philanthropic work, including Microsoft Chairman Bill
Gates and former United Nations Secretary-General Kofi Annan.
Mr. Gates
was quoted as saying that while he was “not in a position to comment on any of
the particulars of the case against him... [he wanted] to round out Rajat's
profile as you consider the appropriate sentence for him.” Mr. Annan similarly
said, “I urge you to recognise Rajat for the good he has done in the world, to
give him the credit that he deserves for helping others and to take into
account his efforts to improve the lives of millions of people.”
Judge
Rakoff, however, is likely to have faced the complex task of balancing these
dimensions of Mr. Gupta’s case with prosecutors’ arguments that his insider
trading and conspiracy were “shocking” and that his “crimes are extraordinarily
serious and damaging to the capital markets.
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