89insidestory· books
AUGUST 2019establishing how close Rajaratnam and Gupta had
grown, showing that the latter had a key card and
easy access to Galleon’s office.
The second call was far more incriminating.
On 23 September 2008, Gupta participated in a
Goldman Sachs board meeting, which discussed
an agreement by Warren Buffet’s firm, Berkshire
Hathaway, to invest $5 billion in the bank, a major
show of trust at the height of the financial crisis.
The board unanimously approved the investment,
and Gupta signed out of the meeting at 3.54 pm.
Sixteen seconds later, records show, there was a
call from his phone to Rajaratnam, which was not
recorded by the wiretap. Following the call, Raja-
ratnam ran onto the trading floor and shouted at
his employees, “Buy Goldman Sachs!” With two
minutes to go to the close of trading for the day,
Rajaratnam bought enough shares to net a million
dollars in profit when he sold them the next day,
after the news of the investment broke. He was
heard gloating on the wiretap, “I heard something
good might happen to Goldman.”
Gupta’s lawyers pointed out that Goldman
stocks had been rising since 1 pm that day, and that
it was not unusual for a man as busy as Gupta was
to return phone calls immediately after a board
meeting. He was, they said, looking to get in touch
with Rajaratnam for some official documents
regarding Voyager, which he had to submit to his
own financial advisors at JP Morgan. He had en-
tered the investment on such a conviction of trust
that he did not use a signature authority.
The third call happened a month later, on 23
October. Again, it was immediately after a Gold-
man Sachs board meeting on the impending layoff
of about three thousand employees. This time, the
call took place after trading for the day had closed,
but the next morning, Rajaratnam sold hundreds
of thousands of shares within a minute of markets
opening, to avoid losses of $3.6 million. In another
call recorded on wiretap, he told a colleague that
he had heard from “somebody who’s on the board
of Goldman Sachs” that the company’s earnings
statement, which “they don’t report until Decem-
ber,” indicated a loss of two dollars per share. “I’m
gonna whack it, you know,” he told the colleague.
Again, the defence claimed that the news of the
layoffs had been reported in that day’s Wall Street
Journal, which indicated that the share price was
going to drop. Gupta’s lawyers asserted that earn-
ings were not even discussed at the meeting in
question. However, Lloyd Blankfein, who was then
the CEO of Goldman Sachs, testified that it was
customary for him to discuss earnings at board
meetings.
As for the phone call itself, Gupta maintains in
his memoir that it was about the Voyager fiasco.
“I don’t remember the exact conversation,” he
writes, “but the general theme of our communi-
cations during that period was me pressing for a
resolution but trying to be courteous, not wanting
to alienate him, and him asking me to be patient,
insisting that he was working on it.” Thus, in the
summer and fall of 2008, it was unsurprising to
Gupta that the first person on his call list was
Rajaratnam. It was, he adds, the busiest period
of his life, during which he struggled to keep up
with the demands of his philanthropic work, his
investment ventures and his various board posi-
tions. “That was the real story behind many of the
events referenced in the charges,” he writes. “It
was the story of a ridiculously busy, overstretched
man trying to manage his personal financial af-
fairs while also guiding numerous major compa-
nies and non-profits, at home and abroad, during
one of the most volatile periods in our economy’s
h istor y.”
Gupta certainly had a more challenging time
articulating his proof in court, especially that his
relationship with Rajaratnam had indeed soured
at the time of these conversations. He was found
guilty for the two alleged tips, with a crucial part
of the prosecution’s narrative centring on the call
Gupta was not charged for—perhaps because there
were no records of transactions immediately fol-
lowing the call.
This was the phone call on 29 July. In the
conversation, Rajaratnam mentioned rumours
he had heard of Goldman wanting to buy a com-
mercial bank. Gupta confirmed the rumour, and
added that it was discussed at the board meet-
ing. “I cringed to think about this being played
at the courtroom,” he writes. “In this instance, I
should have been more careful.” Galleon was an
important client for Goldman Sachs, and he told
Rajaratnam that the bank would go for a good
deal. “Perhaps I said more than was strictly ap-
propriate for my role as a board member, but my
motives were to support, not betray, the bank,” he
writes. “Would anyone in the courtroom realise
this though, when I was given no opportunity to
explain myself?”
The even more damning part of the conversa-
tion took place a few minutes later, when they
begin discussing their mutual friend, Anil Kumar.
“I’m giving him a million dollars a year for do-
ing literally nothing,” Rajaratnam said. Gupta
responded, “I know, you’re being... I think you’re
being very generous.”
“When I listened back to the tape, I could hear
in my voice that I wasn’t fully taking in what
Raj had said, or taking it literally,” Gupta writes.
“Quite frankly, I was tired of their complaining
about each other.” He adds that the payments
could have been legitimate. “McKinsey had no
explicit rule against partners advising friendsopposite page:
Rajat Gupta’s
lawyer, Gary
Naftalis (right),
maintained
throughout the trial
that the burden of
proof lay with the
government, and
advised Gupta not
to testify.