A common theme of a typical Bollywood formula film generally runs something like this: The hero is charged with murder and all evidence is loaded against him. The climax trial scene in a court of law finds the defence lawyer struggling to garner concrete evidence to defend the fallen hero, converting a clinical trial into a drama of eloquence. “Milord, look at the eyes of my client. Do his innocent eyes tell you that he’s guilty?”
Reading through Mind without Fear, the book by Rajat Gupta—former worldwide head of McKinsey & Co who was convicted for insider trading by a US court in 2012 and served a two-year sentence—one is reminded of such Bollywood movies, with just one basic difference. In the movies, the hero is finally acquitted, but in real life, Gupta stood convicted after his appeals were rejected twice.
But the Bollywood connection is not over. Gupta packs his story with all the ingredients of a potboiler—emotion, drama, values, charity, family bonding, personal achievements, altruistic pursuits, et al—and then in a way seems to be asking the reader: “Do you think a person like me will do something like this (insider trading)?” Implicit is his message, “I was a victim of circumstances (much like our Bollywood hero), a not-so-perfect legal system, and a scheming prosecutor.” However, unlike a film, he will find few rooting for the ‘hero’ in the end.
Legally speaking, Gupta’s biggest defence is that the Federal Bureau of Investigation’s wiretap on Galleon Fund owner Raj Rajaratnam did not find him passing on the tip and there was no money trail leading to him. Hence, the evidence against him was only circumstantial.
The case against Gupta dates back to 2012 when he was on the board of Goldman Sachs, retired from McKinsey but still attached as a consultant. On the fateful day, it was divulged at a board meeting of the bank that Warren Buffett would be investing $5 billion in the investment bank. Exactly 16 seconds after the board meeting ended, a call from Gupta’s phone was made to Rajaratnam, who then bought shares of the bank, got several times richer on the trade, and was quoted to have said, “I have heard something good is going to happen to Goldman” before he bought the shares. The latter part of Rajaratnam’s boast was caught in the taped phone conversations.
Rajaratnam was convicted for insider trading charges; not for this bit of information, but several other tips he received from other people, chief among whom was one Anil Kumar, formerly of McKinsey and once a close associate of Gupta. Gupta’s defence is that he does not remember whether he was able to speak with Rajaratnam on that fateful day or was only able to get through to his secretary. Anyway, his story is that he was pursuing Rajaratnam for a long time to recover $10 million of his money that he had invested in a fund with him, having found that while Rajaratnam had withdrawn his money from the fund, he had not paid Gupta his share. Gupta also argues that he was only pursuing details about the fund as his bank needed them. He adds that his friend Ravi Trehan, who had also invested in the fund but withdrew early following a fallout with Rajaratnam, had warned him against the hedge fund owner. However, Trehan, who could have easily bailed out Gupta, chose not to stand as a witness for him. Gupta does not have any convincing or credible explanation for this.
Gupta’s regret is that he did not testify in court on the advice of his lawyers, who felt that cross-examination would have proved harmful. One of his explanations for writing the book is to tell the story that he could not narrate in court. However, this seems a bit odd. Gupta may not have testified, but his points were conveyed during the cross-examination of witnesses testifying against him. Surely, he did not mean to narrate in court the saga of losing his parents during his teens, still managing to go to IIT while looking after his siblings, managing a scholarship to Harvard Business School, getting a job in McKinsey and rising to the top and his various achievements in the field of business, philanthropy and social causes.
Moreover, apart from reiterating the absence of wiretap of his conversation and no money trail, there’s nothing else for Gupta to write about regarding the case. Even the arguments put forward by him are weak and can easily be countered by arguing that he may be using his board position at Goldman and the resultant information as a leverage to recover his money from Rajaratnam.
Gupta has also come down harshly on Preet Bharara, then attorney for the southern district of New York, who prosecuted him. He alleges that in the post-Lehman crisis, Bharara was under pressure, and failing to prosecute any banker, found an easy scapegoat in Gupta. Gupta further claims that since Bharara was also of Indian origin, prosecuting Gupta only helped him project a tough guy image. The only problem with this argument is that there’s nothing empirical to show that Bharara was under any kind of pressure during that time.
Gupta’s critique of the legal system in alleging that the judge did not allow testimonials by his friends on how ‘good a person he was’ during the trial also falls flat because the same judge later allowed his friends to testify before award of sentence, due to which he got away with just a two-year term.
Sadly, despite Gupta’s conviction and less-than-convincing story, the Indian businessmen community will fete him (several have already done so), bringing a bad name to Indian capitalism and free market reforms.