punjabi_khota Posted October 26, 2011 Posted October 26, 2011 (:(( Gupta Charged With Securities Fraud Related to Goldman Tips Rajat K. Gupta, a former Goldman Sachs director who surrendered to the Federal Bureau of Investigation on Wednesday morning, was charged with insider trading, the latest development in the governmentÃÔ multiyear crackdown on illegal activity on Wall Street. Mr. Gupta, 62, is accused of leaking corporate secrets on Goldman Sachs to the hedge fund manager Raj Rajaratnam, the Galleon Group co-founder who was sentenced to 11 years in prison this month for making tens of millions of dollars through insider trading. A federal grand jury in Manhattan charged Mr. Gupta with one count of conspiracy to commit securities fraud and five counts of securities fraud, all related to tips on Goldman Sachs in 2008. ųajat Gupta was entrusted by some of the premier institutions of American business to sit inside their boardrooms, among their executives and directors, and receive their confidential information so that he could give advice and counsel for the benefit of their shareholders, Preet Bharara, the United States attorney in Manhattan, said in a statement. Å¢s alleged, he broke that trust and instead became the illegal eyes and ears in the boardroom for his friend and business associate, Raj Rajaratnam, who reaped enormous profits from Mr. GuptaÃÔ breach of duty. A car said to be transporting Rajat K. Gupta departs from the F.B.I. offices in downtown Manhattan on Wednesday.John Marshall Mantel for The New York TimesA car said to be transporting Rajat K. Gupta departing from the F.B.I. offices in Manhattan on Wednesday. In charging Mr. Gupta, the government is tying up one of the biggest loose ends resulting from the investigation into the Galleon Group, which began nearly five years ago at the Securities and Exchange Commission. Gary P. Naftalis, a lawyer for Mr. Gupta, said in a statement on Tuesday: ŵhe facts demonstrate that Mr. Gupta is an innocent man and that he acted with honesty and integrity. Authorities have broadly pursued insider trading on Wall Street, exacting guilty pleas from a chemist at the Federal Drug Administration, among others, as recently as this month. In the past two years, authorities have charged 56 people with insider trading, including Mr. Gupta; of those, 51 have pleaded guilty or have been convicted of swapping illegal tips about company earnings and other major corporate events. While the majority of those charged have been traders and analysts on Wall Street, Mr. Gupta, 62, is the first executive to be implicated from the upper echelons of corporate America. The charges are a stunning reversal of fortunes for Mr. Gupta. A native of India, he graduated from Harvard Business School and had a global profile as an adviser to some of the nationÃÔ most iconic companies. He served as a director at Goldman, Procter & Gamble and the parent company of American Airlines. In addition to his professional pedigree, Mr. Gupta was a noted philanthropist, serving in coveted posts with the Bill and Melinda Gates Foundation. Mr. GuptaÃÔ case has been a tricky one for the government. Though his name came up repeatedly at Mr. RajaratnamÃÔ trial, both in testimony and in secretly recorded phone conversations, the Justice Department never filed charges against him. The S.E.C. filed an administrative action against Mr. Gupta, and he countersued. The agency later dropped the civil proceedings, but reserved the right to refile the case. On Wednesday, the S.E.C. filed a complaint against Mr. Gupta and Mr. Rajaratnam, alleging an ÅÆxtensive insider trading scheme. Ũupta was honored with the highest trust of leading public companies, and he betrayed that trust by disclosing their most sensitive and valuable secrets to the disadvantage of investors, shareholders, and fellow directors, Robert S. Khuzami, director of the S.E.C.ÃÔ Division of Enforcement, said in a statement. Å¥irectors who exploit board room confidences for private gain can be certain they will ultimately be held responsible for their illegal actions. The strength of the governmentÃÔ case is unclear, but details that emerged during Mr. RajaratnamÃÔ trial were explosive. In their original action, the S.E.C. accused Mr. Gupta of passing confidential information about Goldman and Procter to Mr. Rajaratnam, who then traded on the news. The agency also claimed that Mr. Gupta gave Mr. Rajaratnam advance word of Warren E. BuffettÃÔ $5 billion investment in Goldman during the darkest days of the financial crisis, in addition to other confidential information. But some of the most powerful evidence for prosecutors may not be presented at trial. Information about Goldman Sachs that the government says came from Mr. Gupta was recorded in phone calls between Mr. Rajaratnam and his employees. A judge could say the evidence is hearsay, which means it is too speculative to use in court against Mr. Gupta. In one call that the jury heard in the courtroom, Mr. Rajaratnam told someone: Ū heard yesterday from somebody whoÃÔ on the board of Goldman Sachs that they are going to lose $2 per share. In a different call, Mr. Rajaratnam said, Ū got a call saying something good is going to happen to Goldman. Mr. GuptaÃÔ path to the heights of the global business elite began in India shortly after the countryÃÔ independence from Britain. He attended the prestigious Indian Institute of Technology before enrolling at Harvard Business School. After graduating near the top of his class, he joined McKinsey and quickly rose up the ranks of the white-shoe consultancy, which advises a large swathe of the Fortune 500 companies on corporate strategy, executive training and other business matters. In 1994, at the age 45, Mr. Gupta was tapped to lead McKinsey. During his tenure, the firm expanded its global reach, aggressively moving into emerging markets like India and China. While he oversaw an era of growth at the consulting firm, his reign was not without controversy. McKinsey encouraged EnronÃÔ transformation from a sleepy energy pipeline company into a high-risk trading operation that ultimately collapsed amid an accounting scandal. Jeffrey Skilling, EnronÃÔ former chief executive, was a McKinsey alumnus.
Raghav_12 Posted October 26, 2011 Posted October 26, 2011 After conviction of that Sri Lankan fellow - Raj Ratnam (?) it was always on cards. These all fellas at Galleon worked quite like a team.
Raghav_12 Posted October 26, 2011 Posted October 26, 2011 ye ek desi fraud hai You would do better if you research a bit before making such sweeping statements, particularly on the matters you have no clue about. Somebody who started from India (IITD alum) and went on to become CEO of world's one of the top most, if not absolutely top, Consulting firm, McKinsey, has to be more than a "Desi Fraud". He is widely recognized as first Indian born CEO of a global corporation. His list of achievements in corporate is really long. He is also one of the founders of ISB. http://en.wikipedia.org/wiki/Rajat_Gupta However, it is unfortunate that after an such exemplary career, he has to face all this litigation after his retirement.
achilles Posted October 26, 2011 Posted October 26, 2011 The price an Indian/outsider pays for making it big in someone else's country.
ravishingravi Posted October 26, 2011 Posted October 26, 2011 The price an Indian/outsider pays for making it big in someone else's country. You cannot be serious, right ? He is a fraudster or at least an accused of insider trading. There is evidence against him. Hate to go on self flagellation mode again but we Indians don't exactly have reputation across the world for being ethical.
WC2011INDIA Posted October 26, 2011 Posted October 26, 2011 You would do better if you research a bit before making such sweeping statements, particularly on the matters you have no clue about. Somebody who started from India (IITD alum) and went on to become CEO of world's one of the top most, if not absolutely top, Consulting firm, McKinsey, has to be more than a "Desi Fraud". He is widely recognized as first Indian born CEO of a global corporation. His list of achievements in corporate is really long. He is also one of the founders of ISB. http://en.wikipedia.org/wiki/Rajat_Gupta However, it is unfortunate that after an such exemplary career, he has to face all this litigation after his retirement. Dude, I just saw the headline of the article "Gupta Charged With Securities Fraud Related to Goldman Tips" I am sure there is some hard evidence against him. That's why he is in trouble.
Raghav_12 Posted October 26, 2011 Posted October 26, 2011 Dude, I just saw the headline of the article "Gupta Charged With Securities Fraud Related to Goldman Tips" I am sure there is some hard evidence against him. That's why he is in trouble. That's why I am saying, don't educate others on forum when you have just seen headline. Rajat Gupta is a person of quite high stature and till now he has been only charged, not convicted. Secondly he has been accused of insider trading, not of any open fraud, which is very gray area.
yoda Posted October 26, 2011 Posted October 26, 2011 That's why I am saying just don't educate others on forum when you have just seen headline. Rajat Gupta is a person of quite high stature and till now he has been only charged, not convicted. Secondly he has been accused of insider trading, not of any open fraud, which is very gray area. There is no gray area. Insider trading is illegal, period.
yoda Posted October 26, 2011 Posted October 26, 2011 However, it is unfortunate that after an such exemplary career, he has to face all this litigation after his retirement. Well when you leak board room secrets to friends who then trade using that, you got to face the music.
akshayxyz Posted October 26, 2011 Posted October 26, 2011 ^@#9 ++ Rajat Gupta has had exemplary career, except for this one blemish at the very *** end. As for insider trading, it is much more prevalent than it comes out in the news. At that level - it is almost unavoidable evil - due to temptations, or peer pressure or corporate culture at the top or whatever. You don't get to the top and stay there w/o accumulating few corpses in your cupboard. After that, especially in India, it is about how well connected you are and how good you are at carpet-engineering (hiding the mess under the carpet, and keep it there). And for someone generalizing that Indians are bad at ethics - there is some bit of truth in it, but there have been countless examples all over the world - wherever there is money and power - it is almost unavoidable and out of an individual's hand most of the times. Of the top names, even Larry Ellison was accused of the same around the bubble burst of late 1990s - and once he leaves, even he will be celebrated like Steve Jobs. Also, from US/developed-countries' corporate world itself, there have been many examples of questionable un-ethical practices/decisions - that are far more dirty, evil than insider trading.
Mariyam Posted October 26, 2011 Posted October 26, 2011 Well when you leak board room secrets to friends who then trade using that' date=' you got to face the music.[/quote'] Its quite a prevalent practice here. And honestly, there is no way that it can be checked or even detected. Detection happens only when someone involved spills the beans or realizes that he has made lesser money than his friends. :P Also proving that some one made a profit based on insider information ( which at times, can be speculative in nature) and getting a conviction is very difficult. Unless the case involves huge amounts of money, people let them be. What is the Yankee equivalent of the SEBI? Do you guys have such a regulatory body? I was surprised to see the FBI handle such crimes. In India we have the ED (primarily) and the CBI who would look into such cases.
ganeshran Posted October 26, 2011 Posted October 26, 2011 Insider Trading is as illegal as it gets and not some grey area. Regardless of how prevalent it is, it is still against the laws and if the charges hold up in court, Gupta deserves the sentence he will get.
ganeshran Posted October 26, 2011 Posted October 26, 2011 AFAIK, insider trading is illegal for the sake of it. The illegal part ( what you are liable to get booked for) is market manipulation. Inside trading is a huge information advantage, a person can unfairly make millions overnight and consequently affect the share price of the company.
Mariyam Posted October 26, 2011 Posted October 26, 2011 Inside trading is a huge information advantage' date=' a person can unfairly make millions overnight and consequently affect the share price of the company.[/quote'] I know that. But if you can find a way to make millions ( by insider trading) and yet not drastically alter the market, in India at least, it will be difficult to charge you for anything. If you are ever detected that is.
akshayxyz Posted October 26, 2011 Posted October 26, 2011 Its funny that most of the money the Financial institutions, FIIs etc. make (at least in trading), is due to - as simple as - "informational advantage" they have over the common people/others. and which is legal.
ravishingravi Posted October 26, 2011 Posted October 26, 2011 I know that. But if you can find a way to make millions ( by insider trading) and yet not drastically alter the market' date=' in India at least, it will be difficult to charge you for anything. If you are ever detected that is.[/quote'] Yup Mariyam, that is how the penalty is calculated in India for insider trading based on the profits made. I think it is 25 crores or 3 times the profits made whichever is more. Not sure. As for the point you raised, it is altering the Market because you are selectively leaking the information. Goes without saying that info. would have the "potential" to alter the Market. I think if that is established "actual" alteration is not required to be proven.
Raghav_12 Posted October 26, 2011 Posted October 26, 2011 There is no gray area. Insider trading is illegal' date=' period.[/quote'] I am not questioning legality of insider trading. Gray area is around what can be termed as Insider trading and what can not be. It all depends whether information that you are passing on is "material" information or "non-material" information. Somebody betting on speculations and getting lucky in process, can not be accused of insider trading. As Mariyam posted earlier, it's impossible to stop insider trading. But if you are unlucky things will come out in open and you may be charged.
Raghav_12 Posted October 26, 2011 Posted October 26, 2011 Its funny that most of the money the Financial institutions' date=' FIIs etc. make (at least in trading), is due to - as simple as - "informational advantage" they have over the common people/others. and which is legal.[/quote'] Regulatory bodies try to categorize information in two categories - Material and Non-material information. Material is some kind of factual information while non-material is not. AFAIK, you can get non-material information and speculate without violating any rule. However, leak of Material information is illegal. FII's etc supposedly have informational advantage out of better networking and more research capacities, not because of insider information and that's why they are considered legal.
Recommended Posts