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Fall from grace of the insider

From humble beginnings to meteoric rise to sharp fall, Rajat Gupta’s tale is one of greed taking its toll. Yashwant Raj reports.

business Updated: Jun 17, 2012 00:26 IST
Yashwant Raj

As Rajat Gupta listened to the verdict, he showed no emotions. The face was a mask with finely cut angles as it had been for most of the trial.

When he had looked around, there was a look on the face that said: you might belong here, but I don’t. In a federal courtroom fighting charges of insider trading.

The expression didn’t change at all, when he was read the verdict, guilty on three counts of securities fraud, which he must have known, carry 20 years each, and conspiracy, five.

In the visitors’ section behind him, his wife, Anita, whom he met and married as students of IIT Delhi, collapsed, leaning against the bench. His four daughters sobbed.

For four weeks, they had endured the discomfort of walking past a bank of cameras into the courthouse and leaving with only the hope of a acquittal at the end of it.

On Friday morning, the jury came back, after just day and half of deliberations to find Gupta guilty, compared to 12 days a jury took to convict Galleon owner Raj Rajaratnam last May.

The case against Gupta was clear, and much as some jurors wanted him to walk and go home to his family, as one of them has said, they couldn’t overlook the evidence of his guilt.

Gupta is free on bail till October 18. His lawyer Gary Naftalis has said he plans to appeal for the verdict to be set aside, failing which he will appeal against it.

Else, a jail cell close to Bernie Madoff’s?

That was a long way for a man who broke several glass ceilings as he rose in the world of business as the first non-American managing director of McKinsey, a leading management consultancy firm.

And he was business royalty in India, much sought after advisor and consultant. He went on to co-found the prestigious Indian School of Business with protege Anil Kumar, a colleague from McKinsey, who was also later convicted insider trading..

Born in Kolkata — it was called Calcutta then, Gupta moved to Delhi with his family when he was young. His father was a journalist and his mother a Montessori teacher. He lost both in quick succession when he was 15 and was on his own with his siblings.

“Despite being orphaned and despite having to watch out for his younger siblings, he worked his way through adversity in India with honours and his academic achievement earned him a scholarship — a scholarship to study at Harvard Business School,” lawyer Gary Naftalis said about his client in his opening remarks at the trial.

Gupta went to Modern School, Delhi and then to IIT Delhi, where he studied mechanical engineering. That’s where he met his wife Anita Mattoo, who, two years his junior, was studying electrical engineering. They met during rehearsals for a play they were doing together at IIT, called “Ratan” — she played his grandmother. They married in 1973.

The same year, Gupta won a scholarship to Harvard Business. Reuben Aragon, a Mexican-American dorm-mate from Harvard, told Business Today many years ago: “There was a spark there. You knew he would definitely be going some place.” And he was about to be proven right.

Gupta joined McKinsey in 1973, and soon rose to head its Scandinavian operations, then came back to the US to head the Chicago office. In time, he rose to be elected its first non-American managing director.

Gupta is credited with aggressively expanding the firm, nearly doubling the size then to 891 partners.

He also changed the pay structure at the company, giving more to partners, and, some said, watering the values at the firm. Enron, a firm closely linked to McKinsey, happened on his watch.

Gupta, meantime, was doing well from himself. Bloomberg cited friends and former McKinsey employees in 2011 to say he could be making between $5 million and $10 million. He paid $6 million for a mansion in Connecticut, previously owned by the JC Penny family, and bought a vacation home in Florida and a luxury apartment in Manhattan.

Gupta stepped down as McKinsey chief in 2003 and launched a series of equity funds that didn’t got too far. He eventually floated Voyager Multi Strategy fund with Galleon owner Rajaratnam in 2007, investing $10 million of his own money, all of which, Gupta’s defense team said, he lost.

Soon, according to authorities, he was passing on insider information to Rajaratanam, who had been under regulatory scrutiny since 2006.

Gupta’s tips to him as board members of Goldman Sachs and P&G would eventually get him into trouble, and the conviction on Friday.