I'm not sure if prosecutors are doing an effective job of proving the case against Raj Rajaratnam. But they certainly have proved that Rajat Gupta was a bad seed.
Tapes played during the Rajaratnam trial have Gupta revealing confidential merger discussions he was privy to as a member of the board of Goldman Sachs . That's bad enough.
But, as Evan Newmark points out, it may be even worse how blandly Gupta reacts to a discussion about confessed insider trader Anil Kumar.
Oddly, I don’t think Gupta’s misuse of his Goldman board position was the ugliest feature of the call. That distinction goes to the way Gupta blithely accepted Rajarantam’s shady dealings with Anil Kumar, Gupta’s McKinsey protégé.
Here’s part of their exchange:
Raj Rajaratnam: Now, from, for the last three or four, I mean four or five years, I’ve given him a million bucks a year.
Rajat Gupta: Yeah, yeah.
Raj Rajaratnam: After taxes, off shore cash.
Rajat Gupta: Yeah, yeah.
Those Gupta "yeahs" are not "yeah, I’m sort of listening to you, Raj", those are "yeah, you’re right, Raj. That Anil is an ungrateful leech."
Please listen to the wiretap of the call yourself. The tone of Gupta’s voice will tell you much more than simply reading a transcript.
Here was the former Managing Partner of McKinsey acknowledging that Rajaratnam is paying offshore cash to a McKinsey partner, violating McKinsey’s internal disclosure and conflict of interest rules, as well as evading U.S. taxes.
It's hard to see how McKinsey can avoid doing a thorough investigation of Gupta's activities while he ran the consulting firm. It's simply not plausible that Gupta went this bad only after he left McKinsey.
This kind of moral corruption takes time to cultivate.
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