Convicted Felon Will Not Be Eased Out Of His Last Remaining Business Enterprise - Dealbreaker

Convicted Felon Will Not Be Eased Out Of His Last Remaining Business Enterprise

Insider-trading scams can be hard on a friendship.
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Insider-trading scams can be hard on a friendship. For instance, we doubt that Rajat Gupta has many warm feelings left for his old buddy Raj Rajaratnam. Nor, it seems, is he feeling particularly kindly towards he and Raj's partner in private equity firm New Silk Road Partners.

Even facing two years in prison, the former McKinsey & Co. chief does not care to be screwed on a business deal. Which is what he says is happening, re: New Silk Road and his old buddy Parag Saxena.

At issue is an India-focused private-equity firm called New Silk Route Partners Ltd. that Mr. Gupta founded with Parag Saxena in 2007. While facing charges of insider trading, Mr. Gupta at Mr. Saxena's request distanced himself from the firm by giving up control of his voting shares, according to the suit, which was filed Thursday.

Mr. Gupta also gave up the title of chairman but retained the ability to appoint a member of the firm's two-person board, the lawsuit says. The problem came when Mr. Saxena attempted to block Mr. Gupta's nominee to the board in March in an effort to gain "unfettered control over" New Silk Route, the lawsuit says.

Mr. Saxena, who serves as chief executive at New Silk Route, declined to comment through a company spokesman. The spokesman said that while New Silk Route itself isn't named as a defendant in the suit, it believes the lawsuit is without merit. He added that New Silk Route "remained committed to severing all ties with Mr. Gupta."

Gupta Sues Business Partner Over Control of Investment Fund [WSJ]

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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:

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Rajat Gupta's Lawyers May Try The "Everybody Was Doing It" Defense

There is much to like in this morning's Journal article about the Rajat Gupta insider trading prosecution, including a nice illustration of how the inside information that Gupta allegedly passed to Raj Rajaratnam actually seems to have been out in the market already. But let's start with the transcript of the call between Raj Rajaratnam and his trader Ian Horowitz, which the Journal has redacted not for confidentiality but for saltiness: Just so you can see Raj Rajaratnam saying "fuck" a lot, the full transcript of that call is here. But, anyway, the Journal story: