Gupta’s conviction speaks volumes about the seriousness of the US department of justice in tackling rampant insider-trading and bringing fraudsters to speedy justice
The two-year prison term and fine of $5 million handed out to the former director of Goldman Sachs, Rajat Gupta, for leaking confidential board-room information has come as a shock to his friends and admirers in India.
He was a role model for all aspiring Indians as he rose from being orphaned as a teenager in Kolkata to head organisations like McKinsey and be on the boards of Goldman Sachs and P&G. But his conviction was not unexpected and speaks volumes about the seriousness of the US department of justice in tackling rampant insider-trading and bringing fraudsters to speedy justice.
There is a school of thought that does not consider insider trading a crime while some call it a “victimless crime” that, therefore, does not warrant a prison sentence. But as US district judge Jed Rakoff, who sentenced Gupta, said, insider trading is a “very serious crime”, one that feeds cynicism among average investors that financial markets are rigged. “This is a country where honesty pays off,” he said and added, “While no defendant should be made a martyr to public compassion, meaningful punishment is still necessary to reaffirm society’s deep-seated need to see justice triumphant. No sentence of probation, or anything close to it, could serve this purpose.”
Judge Rakoff had received an appeal for leniency for Gupta signed by 400 VIPs, including Bill Gates and former UN Secretary-General Kofi Annan. Gupta’s is probably the 70th insider-trading case to end in conviction. The US justice department had in 2009 started a war against financial corruption on Wall Street. Ironically, it was another Indian-born American, the US Manhattan attorney Preet Bharara, who brought 72 insider-trading cases of which one was against the billionaire founder of the hedge fund Galleon, Raj Rajaratnam. Rajaratnam, who is serving an 11-year sentence since last year on insider trading charges, is said to have made $75 million on insider information on Goldman Sachs provided by Gupta.
Is there a lesson from this case for India, that no matter how powerful you are, the law is equal for all? It is unfortunate that those who need to learn lessons will not as they have their own rule: that rules are only for the aam aadmi. Gupta would never have faced this problem had he done the same thing in India. Ramalinga Raju, formerly of Satyam, who was caught for fraud in 2009, is yet to face trial three years on. A former board member of the Securities and Exchange Board of India said the chances of punishing a corporate leader for violation of securities laws are very slender and blamed Sebi, which, he said, was weak in enforcement while others, like the police, do not have adequate powers.
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