86 THE CARAVAN
insidestory· books
into Galleon International, perhaps as
an arm of Galleon itself.
Six years after their first investment
together, Rajaratnam was found guilty
of insider trading. It turned out that
his stratospheric success had less to do
with his impeccable work ethic than
with his well-placed friends within the
corporate world. These friends, one
of whom was Anil Kumar, would pass
him confidential information—“tips”—
about the goings-on at various Fortune
500 companies, for which they were
paid generously, to the tune of millions
of dollars, through dubious offshore
channels. The investments Rajaratnam
made based on the tips bore him over
twenty million dollars—Galleon Group
was worth $7 billion at its peak, in
2008—making for the biggest insider-
trading scandal in history.
Proportionately, Rajaratnam received
the longest ever sentence for insider
trading. The lead prosecutor was Preet
Bharara, then the US attorney for the
southern district of New York, whose
Twitter bio describes him as a “proud
immigrant” and a “patriotic American.”
In the anger that gripped the United
States after the 2008 financial crisis,
Bharara assumed the role of the cru-
sading lawyer who would stop at noth-
ing to punish those guilty of corruption
and Wall Street crime, no matter where
they were from. In his own memoir,
Doing Justice: A Prosecutor’s Thoughts
on Crime, Punishment and the Rule of
Law, Bharara describes being criticised
for being anti-Indian, since a number
of his high-profile cases dealt with de-
fendants of Indian origin, but he calls
such criticism “colossally stupid,” since
his team had “prosecuted a rainbow
coalition of defendants and organisa-
tions” during his tenure.
Bharara was able to get Anil Kumar
to agree to a plea bargain—a concept
Gupta described at the launch as one
of the biggest flaws of the American
justice system, because it incentivises
accused parties to testify against their
co-accused in exchange for a lighter
sentence. In an interview with the
news channel NDTV in March this
year, Gupta called himself a “political
prisoner,” a pawn to service Bharara’s
political ambitions. He referred to a
book called The Chickenshit Club: Why
the Justice Department Fails to Pros-
ecute Executives, written by the jour-
nalist Jesse Eisinger, in which Bharara
was featured. The book’s title refers to
prosecutors who never lose cases be-
cause they always choose the easy ones.soon after he was charged, Gupta
found himself frozen out by McKin-
sey. It was the only company he had
ever worked for, and for 34 years. At
that point, Gupta had only been ac-
cused, and all the evidence against him
seemed circumstantial. His swift re-
moval from the company’s alumni di-
rectory and the revocation of his McK-
insey email account rankled, he writes,
being “so uncharacteristic of the princi-
pled firm I’d always so deeply respected
and antithetical to the partnership
values.” Gupta has steadfastly main-
tained his innocence, then and now. Inthe first twenty pages of his memoir,
he acknowledges how ill-advised his
relationship with Rajaratnam had been,
despite the glowing endorsements.
“He did have a certain arrogance, an
above-the-rules air that should have
been a red flag,” he writes. He blames
his trusting nature, which had held him
in good stead throughout his career.
“Treat people as if they are worthy of
trust and respect and they will prove
themselves to be so. I wasn’t always
right, but I’d been right so many times
that it had become a point of pride—
perhaps more so than I realised.”
In this case, Gupta was irrefutably
wrong. His relationship with Rajarat-
nam had begun deteriorating ever since
he learnt, in April 2008, that the latter
had withdrawn nearly fifty million dol-lars from the fund without informing
him. “Not only had Raj lied to me but
his withdrawals had left the fund with-
out a cushion in the turbulent markets,
and eventually the banks shut it down,”
he writes. “My entire stake looked
like it was gone.” Rajaratnam, he adds,
“continued to be evasive, telling me that
he was working with the banks to try
to recoup the equity, but by early 2009,
it was clear that all such attempts had
come to nothing. I was forced to accept
that the money was gone, and that was
the last I heard of Rajaratnam until the
news of his arrest.” He asserts that his
calls to Rajaratnam were not to provide
him tips but “to try to figure out what
had happened to the Voyager money.”
The prosecution built its case pri-
marily around a series of phone calls
between Gupta and Rajaratnam, most
of which took place after board meet-
ings of two companies in which Gupta
was a director: Goldman Sachs and
Proctor & Gamble. Soon after these
calls, Rajaratnam traded the compa-
nies’ shares, profiting to the tune of five
million dollars. Gary Naftalis, Gupta’s
lawyer, was initially optimistic—there
had never been an insider-trading con-
viction based on only circumstantial
evidence. Naftalis maintained that the
burden of proof lay with the govern-
ment, and advised Gupta not to testify.
At the launch, Trehan asked him if he
regretted his choice of lawyer. Seem-
ing quite pained, Gupta answered, “So,
he always insisted there was no case,
and, if you look objectively, there was
no case. You have to meet three things
in insider trading: one is actual insider,
market-moving information has to be
passed; second is that there has to be
real benefit, a quid-pro-quo arrange-
ment; and the third is there has to be
criminal intent. And they had proof of
none of this.”
He said that the government had
been tapping Rajaratnam’s phone for a
year and a half, but there was not one
recording of Gupta giving out insider
information. “There was not a single
witness. There was not a single email
or communication they could find.
They combed over my finances for cer-
tain years; they couldn’t find a single
benefit. They kept claiming I owned
15 percent of Galleon International; IIt turned out that Rajaratnam’s stratospheric success
had less to do with his impeccable work ethic than
with his well-placed friends within the financial
world, who would pass him confidential information.