Rajat Gupta's Friends Have A Pretty Good Excuse For Those 'Lapses In Judgement'

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The most common refrain when insider trading or other such fraud occurs on Wall Street is the question of why? Why did he/she do it? Money is often times too simple an explanation (especially when there are mommy issues to be explored) but other times it's not. Like in the example of former McKinsey partner Rajat Gupta, i.e. the guy who called Raj with information about Goldman Sachs 23 seconds after getting off the phone with Lloyd and the rest of the board. In Gupta's case, he just 1) seriously wanted that cash and 2) he wanted is ASAP.

This theory was previously floated by Rajaratnam, during a tapped phone conversation we heard during his trial. Raj-Raj told pal Anil Kumar:

“I think he wants to be in the [private equity] circle. That’s a billionaire circle, right? Goldman is like the hundreds of millions circle, right?” He added: “And I think here he sees the opportunity to make $100 million over the next five years or 10 years without doing a lot of work.”

And today backed up by an old buddy.

While Gupta was devoted to his philanthropy in India, his quest to amass great wealth led him to lapses in judgment, says Bala Balachandran, dean of the Great Lakes Institute of Management in Chennai, India, and a friend for almost three decades.
“He wanted a billionaire’s life and the question for him was how could he become a billionaire in a short time,” Balachandran says. “You’re an eagle, so why do you want to be with these chickens who can’t fly?,” Balachandran says he told Gupta. “You’ll get the chicken flu."

Not wanting to get the chicken flu/soar among his eagle peers/making bank, Gupta made the decision to help Raj out with some material, non-public information and also set up a little side biz to bring in extra cash.

At McKinsey, a firm known for keeping secrets, Gupta harbored a few of his own. As the managing director and then as senior partner of McKinsey for four more years before he retired, he ran his own consulting business on the side -- a violation of McKinsey rules.

He and Anil Kumar, a former McKinsey partner who last year pleaded guilty to passing confidential information to Rajaratnam, set up their own consulting company. Gupta also independently advised Genpact Ltd, a Gurgaon, India-based firm that manages business processes for other companies. That work, too, broke McKinsey’s rules.

Perhaps McKinsey didn't hear that said rules don't apply to eagles on the fast track.

Rajat Gupta Secretly Defied McKinsey Before SEC Says Rajaratnam Was Tipped [Bloomberg]

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The Universe Has Good News And Less Good News For Rajat Gupta

The less good news is that a jury found the former McKinsey executive guilty on three counts of securities fraud and one count of conspiracy for passing material non-public information to his friend*, convicted insider trader Raj Rajaratnam. The good news: 1. Rajat could go to jail for twenty years but probably won't ("Gupta faces up to 20 years in prison on each of the fraud charges and up to five years for the conspiracy charge. But his sentence is likely to be significantly lower under federal guidelines.") 2. Sentencing is scheduled for October 18 so he's got the whole summer and then some into a Zen place about going to prison. Also! Plenty of time to do all those things he was too busy for when he was working. This is gonna be his time. Time to taste the fruits and let the juices drip down his chin. The summer of Rajat! Gupta Found Guilty Of Insider Trading [WSJ] *Friend Rajat's ass.

Rajat Gupta Defense Team: You Think Our Client Would Pass Inside Information To A Guy Who Didn't Even Have The Decency To Invite Him To His Birthday Party?

What motivates people to share material non-public information with a person they know will use it for profit? For some, it's simply about greed. For others, it's about the thrill. For yet others, it's about pillow talk. For Rajat Gupta, the McKinsey director currently on trial for allegedly passing inside information to Raj Rajaratnam, it's about friendship, according to prosecutors who are trying to make the case that Raj and Rajat were the best of buds and that's what buds do. They they back each other up when they drunkenly hit on the girlfriend of the wrong guy at the bar, they stand up as best men at each others' weddings, they pick up the phone and say "Buy GS" when they know for a fact Warren Buffett is about to do so, too. And although attorneys representing Gupta don't deny the two were thick as thieves, they argue that while perhaps back in the day Rajat would have provided useful information to Raj, there is no way he would have done so after Big R twice violated the bonds of friendship. In the first instance, there was this: Defense attorneys have argued that Messrs. Gupta and Rajaratnam had a falling out in fall 2008 after Mr. Gupta lost his entire $10 million investment in a fund managed by Mr. Rajaratnam and therefore wouldn't have passed along inside information...The precise timing of their relationship's deterioration could be crucial in proving Mr. Gupta's guilt or raising doubts in the minds of jurors about whether he conspired to commit securities fraud...Defense attorneys have said Mr. Gupta was furious at Mr. Rajaratnam in the fall of 2008, when Mr. Gupta's $10 million investment in a fund called Voyager Capital Partners Ltd. evaporated. According to Mr. Kumar's testimony, Mr. Gupta felt Mr. Rajaratnam's negligence had allowed Voyager to collapse. And then this happened: