The Rise and Fall of a McKinsey Product.!

                                   It was rightly said by someone “Most of the mess that is called history comes about because kings and presidents cannot be satisfied with a nice chicken and a good loaf of bread.”  The same is talked about Rajat Gupta who is hailed as a poster-boy of Indians scaling great heights in corporate echelons abroad and his friends describe him as a God-fearing, “First-Class guy” and who is now involved in Insider trading scam.!

Mango Background - 

Born in Maniktala in Kolkata, son of a freedom fighter-turned-journalist father and a school teacher mother, Gupta was orphaned at the age of 18. Ranking 15th in the IIT entrance exam of 1966, Gupta was admitted to IIT Delhi on a scholarship from where he did his B-Tech in mechanical engineering. 

He was Offered a job at cigarette maker ITC Ltd, then about the most sought-after employment for a young graduate, Gupta instead opted to go to Harvard Business School, where he was a Baker Scholar, an honour bestowed on the top 5 percent of the MBA class. He landed a job at consulting giant McKinsey and quickly rose through the ranks. 

In 1994, he was made the global head of the firm, the first non-American to hold that position. Gupta’s enviable resume boasted of job profiles as board members of some of the biggest US companies. After 10 years at McKinsey, Gupta joined the boards of many corporations and nonprofit organisations. In addition to Procter & Gamble and Goldman, he was a director of the AMR Corporation, the parent company of American Airlines.

The Rockefeller Foundation appointed him a trustee; he was named an adviser to the former US president Bill Clinton and Bill Gates, co-founder and chairman of Microsoft, on their global health initiatives. He is also the co-founder of the Indian School of Business in Hyderabad. Gupta was also appointed as special advisor on management reform to then UN Secretary-General Kofi Annan.

Fall of Gupta - Down down the hill.

But then the climate changed and Gupta found himself in the thick of an insider trading case. Gupta’s undoing began when his billionaire friend Raj Rajaratnam, a Sri Lankan, was charged by federal prosecutors of running of one of the biggest insider trading scams in US history. 

Gupta met Galleon hedge fund founder Rajaratnam through another Indian-American McKinsey partner Anil Kumar. Rajaratnam had made an anonymous contribution of a million dollars to the Indian School of Business, Hyderabad, which Gupta had co-founded with Kumar. Together, they helped start New Silk Route Partners, a private equity firm focused on investments in India. 

The two became friends and occasionally had lunch together, eating Indian takeout in Rajaratnam’s office in Manhattan. Rajaratnam is currently serving an 11-year prison sentence for making millions of dollars in profits and avoiding large scale losses thanks to confidential information he received.

Gupta was convicted on three counts of securities fraud and one count of conspiracy for passing along confidential boardroom information about Goldman and Proctor & Gamble companies to the hedge fund that earned millions of dollars trading on his tips. He was acquitted of two counts of securities fraud. He was found guilty for information about the $5 billion investment by Warren Buffett’s Berkshire Hathaway Inc,and of proving information to Rajaratnam on 24 October 2008 about Goldman stock.

In one call, the day after the Buffett investment announcement, Rajaratnam told trader Ian Horowitz: "I got a call at 3:58, right? ... Saying something good might happen to Goldman." On October 24, 2008 Rajaratnam is caught on the wiretap telling portfolio manager David Lau: "Um, now I, I heard yesterday from somebody who's on the board of Goldman Sachs, that they are gonna lose $2 per share. The Street has them making $2.50."

Prosecutors said Gupta had called Rajaratnam on October 23, 2008, only 23 seconds after a Goldman board meeting heard the firm was headed toward its first quarterly loss ever as a public company. 

Food for thought - Gupta could spend as many as 20-25 years in jail.  But for what.? Just for leaking the Insider information.! All these things happen generally in India. Have not heard till date anyone sentenced for it. As usual "Chalta hai attitude".

Courtesy - Wikipedia & Money control & Shree Nidhi.