Ronnie Sesso, 53, was finding it hard to keep a grip on her emotions as she rendered her decision to the court. By the time jury foreman, Richard Lepkowski had read the complete verdict; two other jurors had broken down in tears. But the man whose fate was being decided sat expressionless, not betraying even a hint of emotion.
On June 15th, 2012, the jury found former Goldman Sachs director, Rajat Gupta guilty on one count of conspiracy and three counts of fraud in the insider trading trial. Gupta was alleged to have traded inside information while on the board of Goldman Sachs with close associate Raj Rajaratnam, head of the hedge fund, Galleon Group. As per the prosecutors, Rajaratnam traded on parts of this information generating illicit profits and avoiding losses worth of USD 23 million.
Rajaratnam, not much of a trouble
Last year, in a separate trial, Rajaratnam was condemned to 11 years in prison, the longest sentence till date for an insider trading case. Rajaratnam’s conviction was largely influenced by his image as that of a lecherous Wall Street biggie.
Every Thursday his employees would get a massage in the office. At Superbowls, he is known to have rented huge mansions to which executives flocked with female escorts. His fondness of horsing around is also well known. Combined with the undeniable evidence and motive, the jury in Rajartanam’s trial had no trouble making up their minds. Still they met over a period of twelve days before finally delivering the verdict.
Gupta’s life, a ‘storybook’
But when it came to Rajat Gupta’s case, the jury took only two days to reach a verdict, despite Lepkowski calling his life a ‘storybook life’.
It was all there. Gupta’s rise from a young orphan, burdened with the responsibilities of his siblings in Kolkata to the boards of McKinsey, Goldman Sachs and Procter & Gamble, was the stuff that makes up modern legends. According to the jurors, the Harvard educated Indian stood for everything the ‘American Dream’ was about.
“I wanted to believe the allegations weren’t true,” Lepkowski, 51, said. “Here was a man who came to this country and was a wonderful example of the American Dream.”
The Jury’s conflict
One thing that troubled the jury was that Gupta’s motive was unclear. His former banker Heather Webster testified in the court that he had an estimated $80 million net worth with income streams of $700,000 a year as the director of Goldman Sachs and another $300,000 a year from other organisations of whom he was a board member. She also testified that Gupta had pledged 70% of his wealth to philanthropic causes.
Looking at his fortune and the height of his career it was very puzzling why he would risk throwing it all away for something which he apparently didn’t benefit from.
“What did Mr. Gupta get out of this by giving Mr. Rajaratnam the information? Was it the future, was it cash?” Sesso said.
One theory was that Gupta needed Rajaratnam’s help to build his private equity fund, New Silk Route, but even that wasn’t quite convincing.
In the end, the jury decided that Gupta was manipulated by Rajaratnam, who already enjoyed a low opinion in the jury’s eyes.
“I wouldn’t say he was an unwilling participant, or that greed wasn’t a part of this,” Lepkowski said. “But I am saying that Mr. Rajaratnam made it easy for Rajat Gupta to break the law.”
Even though the jury felt deeply for Gupta, the circumstantial evidence was too overwhelming. The prosecutors had acquired telephone tapings that proved Gupta tipped off Rajaratnam on multiple occasions, within minutes of a Goldman Sachs board meeting. They were also able to prove that Rajaratnam traded off this information and even boasted on other telephone tapings that someone in Goldman Sachs’ board was giving him the information.
“The information and then the actions taken,” Sesso said. “It was too many coincidences.”
But this didn’t stop some of the jurors from getting emotional as the verdict was read in the court; two of them went out crying.
“We never got comfortable with anything,” Lepkowski added. “The saddest part of the trial for me was the two character witnesses — one who came from India,” to testify for Gupta “and the one who knew him since fifth grade.”
Gupta is to appear before Judge Rakoff on 18th October, when his sentence for securities fraud conviction will be pronounced. Luckily for Gupta sentencing guidelines in America differentiate between those who profit from inside trading and those who do not. Experts believe that Gupta looks at a maximum term of 20 years. But Rakoff is known to be quite lenient and Gupta’s history of charity should go down well with him.
Some believe that Gupta’s ‘storybook’ life has been tainted forever. Instead, it has turned out to be a perfect example of the fact that the higher you rise, the easier it gets for the winds to knock you off.