Skip to main content

Rajat Gupta Appealing Suggestion Passing Material Non-Public Info To Hedge Fund Manager Friend Was "Insider Trading"

It's a dirty, dirty phrase and one Gupta says doesn't apply to him; he's waiting for others to get on board.
  • Author:
  • Updated:

Remember, back in 2008, how Warren Buffett agreed to loan his friends at Goldman Sachs $5 billion to muscle through the financial crisis? And how McKinsey partner and Goldman director Rajat Gupta was on the call in which the details were discussed? And how he hung up the phone, counted to 23, and then called his friend Raj Rajaratnam with the news? And how Raj Rajaratnam then put said good news, which some might describe as material non-public information, to use at his hedge fund? Gupta presumably remembers all this, because he did 19 months on the inside for it. Now, he's hoping a judge will reconsider the whole securities fraud conviction label, as he was apparently just telling Rajaratnam about the investment in a "two guys shooting the sh*t" type way, and not at all in the hopes of some sort of financial gain, the mere thought of which actually sickens him.

The U.S. Court of Appeals in Manhattan on Thursday agreed to reconsider its rejection of the 67-year-old Gupta’s request to throw out a 2012 conviction for passing tips to billionaire hedge fund manager Raj Rajaratnam. Insider-trading cases are coming under renewed scrutiny since the appeals court in Manhattan threw out the convictions of two hedge fund managers in December 2014, ruling a person passing inside knowledge had to at least potentially get some benefit of value, such as money. The decision upended the convictions of another 12 people. Gupta was convicted of passing tips to Rajaratnam in 2008 about Berkshire Hathaway Inc.’s $5 billion investment in Goldman Sachs and the bank’s financial results. He had asked U.S. District Judge Jed Rakoff to overturn the jury’s verdict, arguing the U.S. didn’t prove he got a personal benefit for the tips. Rakoff denied the request, and the appeals court in December declined to overturn Rakoff’s decision.

Rajat Gupta's Insider-Trading Conviction to Get a New Review [Bloomberg]


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:

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.

Prison Puts A Damper On Once Friendly Working Relationship

The Times reports that the friction between Raj Rajaratnam and Rajat Gupta around the Federal Medical Center Devens is more than a little palpable.