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Thursday, October 27, 2011

Ex-Goldman Sachs director Rajat Gupta on fraud charges

Mr Gupta headed McKinsey, a consulting firm that advises global blue chip companies on corporate strategy and business management, before joining the board of Goldman Sachs in 2006.
Charged with five counts of fraud and one count of conspiracy, Rajat Gupta, 62, has been released on $10m (£6.3m) bail and had his passport seized.
The prosecution said the corporate veteran was the "illegal eyes and ears" of hedge fund trader Raj Rajaratnam.
Rajaratnam was sentenced to 11 years in jail for insider trading in October.
Rajaratnam, described as Mr Gupta's friend, "reaped enormous profits from Mr Gupta's breach of duty," prosecuting lawyer Preet Bharara said.
Mr Gupta's trail date has been set for 9 April 2012.
Trial evidence
Civil fraud charges were brought against Mr Gupta by the US Securities and Exchange Commissioner in March.
Those charges allege that Mr Gupta divulged secret information about Goldman Sachs, which Rajaratnam traded on.
His lawyer Gary Naftalis told Reuters news agency: "Any allegation that Rajat Gupta engaged in any unlawful conduct is totally baseless. The facts demonstrate that Mr Gupta is an innocent man and that he has always acted with honesty and integrity.
"He did not trade in any securities, did not tip Mr Rajaratnam so he could trade, and did not share in any profits as part of any quid pro quo."
Recorded phone calls between the two men were played to the jury during Rajaratnam's insider trading trial.
The jury heard that on 23 October 2008, at a private meeting of Goldman Sachs board members, the board was told the firm had incurred a quarterly loss for the first time in the bank's history.
The SEC says that information from Mr Gupta helped convicted trader Rajaratnam make millions of dollars
Phone records showed that Mr Gupta called Rajaratnam 23 seconds after the meeting ended and Rajaratnam sold his entire holding of Goldman Sachs stock, saving millions of dollars.
But correspondents say that some of the most compelling evidence against Mr Gupta - recorded phone calls between Rajaratnam and his associates - may not be admissible in a trial.
Mr Gupta also gave Rajaratnam advance notice that Warren Buffett's company Berkshire Hathaway was considering a $5bn (£3.1bn) investment in Goldman Sachs, a tip that earned him $1m.
During the trial of Rajaratnam, the Goldman Sachs chief executive Lloyd Blankfein testified that Mr Gupta leaked boardroom secrets.
Corporate veteran
Several other convictions have been made in connection with Rajaratnam's insider trading case but the arrest of Mr Gupta brings allegations of misconduct into the highest echelons of corporate America.
Mr Gupta headed McKinsey, a consulting firm that advises global blue chip companies on corporate strategy and business management, before joining the board of Goldman Sachs in 2006.
He was a member of the audit, corporate governance and compensation committees for the financial institution worth more than $50bn.
Mr Gupta also served on the boards of Procter & Gamble, the consumer good giant, as well as the parent company for American Airlines.
He was active in philanthropic circles and was closely involved with the Bill and Melinda Gates Foundation.
Rajat Kumar Gupta is a former longtime top senior partner and director at management consultancy McKinsey & Company, serving as managing director (chief executive) from 1994 to 2003. In this capacity, he was recognized as the first Indian-born CEO of a global corporation. After retiring from active practice, though maintaining an affiliation at McKinsey, Gupta served as corporate chairman, board director or strategic advisor to a variety of large and notable organizations (full list): corporations including Goldman Sachs, Procter and Gamble and American Airlines, and non-profits including The Gates Foundation, The Global Fund and the International Chamber of Commerce. Rajat Gupta is additionally the co-founder of four different organizations: the Indian School of Business with Anil Kumar, the American India Foundation with Victor Menezes and Lata Krishnan, New Silk Route with Parag Saxena and Menezes again, and Scandent with Ramesh Vangal.
On October 26, 2011, Gupta was arrested by the Federal Bureau of Investigation on charges of securities fraud and conspiracy as part of an ongoing and wide-ranging insider trading case in which close friends and business partners Raj Rajaratnam and Anil Kumar were convicted or pleaded guilty, respectively. The Securities and Exchange Commission sued Gupta the same day. Gupta entered a plea of not guilty and was released on $10 million bail.
The SEC had previously filed suit and later dropped charges against Gupta in March-August 2011. Around that time, Gupta's conversations on tape with Rajaratnam while Gupta was a board member of Goldman Sachs gained widespread attention and notoriety. In the wake of the original SEC charges, Gupta resigned the majority of his corporate and philanthropic positions.
McKinsey and Company
Gupta joined McKinsey & Company in 1973 as one of the earliest Indian-Americans at the consultancy. He was initially rejected because of inadequate work experience, a decision that was overturned after his Harvard Business School professor Walter J. Salmon called Ron Daniel, then head of the New York office and later also the managing director of McKinsey, on Gupta's behalf.
Gupta began his career in New York before moving to Scandinavia to became the head of McKinsey offices there in 1981. Elected senior partner in 1984, he became head of the Chicago office in 1990. In 1994 he was elected the firm's first managing director (chief executive) born outside of the US, and re-elected twice in 1997 and 2000. After completing three full terms (the maximum allowed, by a rule he had himself initiated) and nearly a decade as head of the firm, Gupta became senior partner again in 2003 and retired from McKinsey as senior partner emeritus in 2007. Gupta is widely regarded as one of the first Indians to successfully break through the glass ceiling, as the first Indian-born CEO of a multinational corporation.
Over a 34-year career at McKinsey, Gupta directed a number of projects aimed at helping companies develop new product/market strategies and reorganize for improved effectiveness and operations capabilities. He has a broad range of consulting experience with a variety of industries, including telecommunications, energy, and consumer goods.
During Gupta's time as head of McKinsey, the firm opened offices in 23 new countries and doubled its consultant base. His successor Ian Davis was elected by "emphasizing the need for a return to the McKinsey heritage." This was seen as a reaction against Gupta's aggressive firm expansion. It was also a time of perceived shifting of standards. Enron, closely identified with McKinsey, collapsed during Gupta's tenure. During the dot-com bubble he and Anil Kumar created a program for McKinsey to accept payment from its clients in stock. Gupta's accountability for the shifting of standards was weighed differently by different observers.
Gupta's mentors at McKinsey included Ron Daniel, the former managing director who as senior partner first hired Gupta into the New York office, and Anupam (Tino) Puri, the first Indian at the Firm and eventual senior partner.
While he was managing director Gupta co-founded the Indian School of Business (ISB) with friend and fellow senior partner Anil Kumar. The school was ranked number 13 in the world by The Financial Times in its "Global MBA Rankings 2011". Gupta and Kumar have both since resigned as chairman and executive board director respectively.
Gupta maintained an office, executive assistant, email and phone at McKinsey and Company after retiring in 2007— and is sometimes called a "senior partner emeritus" of the firm— though in the wake of subsequent scandals a McKinsey spokesperson was quoted as saying, "Our firm no longer has a professional relationship with Rajat Gupta."
Source : http://en.wikipedia.org

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