15 June 2012

Rajat Gupta conviction

I guess I was 'in the money' on the guilt of Rajat Gupta. Given the facts in public domain, one could see for oneself how clearly guilty he was. The only reason he could get away would be because of the benefit of doubt being given to him. He didn't get away despite certificates of character given to him and many asserting he made a 'mistake'.

I found much of his defence in the media to be self inflicted harm. Witness this. I was on a TV show two weeks back and one of Rajat Gupta's friends claimed that my statement about Rajat Gupta not even waiting for a minute before the end of the Goldman Sachs board meeting before calling his apparently estranged friend Rajaratnam and shortly thereafter Rajaratnam making an extremely profitable purchase of Goldman shares  - as being factually incorrect. Ok, so we have a friend of Rajat Gupta saying something is factually incorrect - something even Rajat Gupta has never claimed.

Equally harmful is the website Friends of Rajat Gupta - which seemingly put up lots of defense documents which Gupta had filed in court. The problem is - the vast bulk of documents did not deny any of the facts asserted - they instead try to suppress on technical legal arguments facts which are uncontroverted. The friends show Gupta trying to suppress facts - and these are his friends? Whoa.

By the way the gentleman in the TV  show also went offensive - saying this was a trial by media - not to mention that 70% of the show ended up being defense by media instead.

See my ET piece from last year here and my blog pieces here and a conversation available in this post. Though, I do feel bad for him - a person of such accomplishment, charisma and talent throwing it all away for money - truly a Greek tragedy, or should I say a tragedy of Grexit proportions? I wish him well during the sentencing - where his past will surely be considered in reducing his time in jail. Not a happy day - but surely deserved.


Lila Rajiva said...


Entirely circumstantial and hearsay and the defense was not allowed to make its case.

Hope it will be overturned on appeal
It's a travesty.

Sandeep Parekh said...

And on what basis do you say 'entirely' and which part was hearsay? Specifics would be great. One of the jurors called the evidence overwhelming.


Anonymous said...

I totally agree with you that even if the evidence in this case was circumstantial, it was strong enough to dispel any `reasonable’ doubt. This is particularly true on one count – board announcement of the Buffet deal, Mr. Gupta’s call to Mr. Rajaratnam, Mr. Rajaratnam ordering purchase of Goldman stock – Mr. Gupta being the only caller on Mr. Rajaratnam’s direct line during the relevant period.

However, the basic mystery about the policy rationale behind the insider trading prohibition remains intact! Popular perception regarding the insider trading practice is that it results in rigging of the market and undermines the fairness and `level playing field’ rules of the financial marketplace. On this view, insider trading victimizes the ordinary investors and enriches the insider trader at their expense. (Media reports talk about the stock market being a level playing field and not a rigged game favoring Wall Street professionals.) The popular outrage against this practice stems from this image of an ordinary investor being cheated out of his / her just dues by a few arrongant market professionals.

That’s not how the US law looks at insider trading! In the eyes of US law, insider trading amounts to misappropriation of confidential information by the trader and therefore is a fraud on the source of the information! (United States v. O'Hagan - 521 U.S. 642 (1997)). So the `victim’ of Mr. Gupta’s insider trading was Goldman Sachs! It has really nothing to do with integrity of the marketplace or fairness to the ordinary investors! Indian law merely sidesteps this issue by defining IT expansively without articulating any policy rationale.

-Mangesh Patwardhan

Anshuman S said...

As per the Financial Times, in an interview after the verdict Rick Lepkowski, the foreman, and Ronnie Sesso, juror number seven, said Mr Gupta was living “the American dream” and they wanted to send him home to his family.

“I wanted to believe the allegations weren’t true,” said Mr Lepkowski, chief development officer with the Children’s Tumor Foundation. But once all the evidence was in he found it “overwhelming.”


I do not think a jury would not allow the defense to make its case and give its verdict without hearing the one of the sides. Though I feel sad for Mr. Gupta, it is a clear violation of the law and the punishment is truly deserved.

Jagdeep Chhokar said...

Well said, Sandeep.

Lila Rajiva said...

Hi Sandeep,

The case rested on three calls, one of which (on July 29, 2008) was admitted even by the prosecution to not be material, and which also, from the defense's evidence was not non-public.
There was never any tip in that call either.

The other two calls, were by the very person who swindled Rajat Gupta (of his entire investment)- Rajaratnam.

Raj was by the government's own account a habitual liar, by the evidence of his bribing corporate directors to become tipsters, a manipulator, by his history of having funded alleged terrorist outfits, a man vulnerable to government pressure

This is the man whose unsupported word (no witness)to fellow conspirators, you are relying on to even know that he had a tipper on the Goldman board.

Do you normally send illegal tips through your office landline?

There were four other proven tipsters at Goldman, whose wiretapped tipping was disallowed from being played to the jury.

Please read the details of the case.

The prosecution gave the defense exactly two months to prepare a defense over material collected by the government over five years.

Judge Rakoff is a known grandstander.

There was not one south asian on the jury. It has been shown that Indians are convicted at much higher rates in white collar crimes for comparable offenses.

There were several high level executives who really did trade on insider knowledge and were never even investigated let alone criminally convicted.

Greg Smith a senior Goldman manager in an article in March 2012 states clearly that Goldman corruption was driven by Blankfein and Cohn.

Gupta is a patsy thrown to the mob, because he is a rich Indian and the man associated with the opening of the Indian economy. That keeps the Occupy crowd happy because McKinsey is associated with Indian job losses.

I could go on, but why bother. Journalists act like echo chambers instead of actually reading the records critically.
And of course none of them seems to be able to place anything in a political context

Shriram Subramanian said...

What is the lesson for India and Indian regulators? Rajat Gupta couldn't have gone for a consent. As a friend of mine who works in securities litigation in New York said: SEC likes to go after high-profile targets to make it a lesson for all. Also, SEC has the tenacity and the gumption to go after any individual - however highly placed. It is indeed sad that many Indian businessmen and friends of Rajat Gupta sought to bring in other angles (racism, etc). I hope SEBI follows on the SEC/US regulators and cracks down on insider trading in Indian capital markets.

Chakku said...

It surprises me how the word of Rajaratnam's secretary can be taken that there was no other phone call between 4pm and 5pm on Sept 23, 2008 !!! Can a secretary (Ms. Eisenberg) remember with such precision, the phone calls made one day, 4 years back??? And that too without a knowledge that this call or calls would turn out to be vital evidences in a man's conviction?

Also, how is it that there is absolutely no direct tap of any insider tip being passed on by Rajat Gupta and this after prolific tapping by the Fed !!!

Yes, after Rajaratnam is found and acknowledged to be a goon, any calls to him may sound incriminating. But returning phone calls soon after board meeting hiatus, could be considered to be passe. Rajat Gupta would have called up so many people, post board meetings.

Why wasn't David Loeb's taps not admitted? If it does not exonerate Gupta, there would have been no harm in eliminating doubt; especially when it involves convicting a human being.

What was the big hurry in completing the trial in 2-3 weeks? Evidences which have taken years to piece together, could be given a full run of treatment, including other wire-taps.

I am sorry, but I feel reasonable amount of doubt with the evidences presented and it does looked like a "cropped photo". I cannot say if Rajat Gupta was innocent; but there is sufficient doubt to prevent conviction.