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Desperate Gupta wanted out of Goldman

Rajat K Gupta, former Goldman Sachs director accused by the government of passing insider information about the Wall Street firm, had tried to resign from the Goldman board in the middle of the 2008 financial crisis, weeks before he is said to have provided tips to the hedge fund manager Raj Rajaratnam. Peter Lattman and Andrew Ross Sorkin report.

business Updated: Mar 14, 2011 21:14 IST

Rajat K Gupta, former Goldman Sachs director accused by the government of passing insider information about the Wall Street firm, had tried to resign from the Goldman board in the middle of the 2008 financial crisis, weeks before he is said to have provided tips to the hedge fund manager Raj Rajaratnam.

According to an audiotape recording released by federal prosecutors on Friday, Gupta sought to leave the Goldman board to take a job as a senior adviser at Kohlberg Kravis Roberts, the private equity firm led by Henry R Kravis, a friend of Gupta.

The recording also suggests that Gupta may have been having personal troubles at the time he is accused of passing the tips. The case is being zealously tracked by corporate America’s top echelon because of Gupta’s high connections: for a decade he ran McKinsey & Company and served on several boards, including those of Procter & Gamble and AMR, the parent firm of American Airlines.

On September 9, 2008, Gupta submitted a formal resignation letter to Goldman, a person briefed on the recording said. But the firm’s executives, including CEO Lloyd C Blankfein, persuaded him to stay because they thought it would send the markets a bad message to have a director resign as a crisis was exploding.

Two weeks later, Gupta told Rajaratnam about Berkshire Hathaway’s $5-billion investment in Goldman before it was publicly announced the next day. Gupta also swapped confidential Goldman information with Rajaratnam two times during 2008 and Rajaratnam traded illegally on the tips, the SEC said. A lawyer for Gupta has denied charges.

Gupta eventually did not stand for re-election from Goldman’s board and stepped down when his term ended in May 2010. The news of Gupta’s resignation letter to Goldman’s board was hinted at in the audiotape of a telephone conversation on August 15, 2008, between Rajaratnam and Anil Kumar.

A KKR spokesman said that the compensation numbers discussed by Rajaratnam and Kumar were inaccurate. Gupta stepped down as a KKR adviser this month after the SEC’s action against him.

A spokeswoman for Goldman declined to comment.

(The New York Times)