Global Indian Newswire

Perhaps the most puzzling aspect of the taped conversation between Rajat Gupta and hedge fund billionaire Raj Rajaratnam released by the Securities and Exchange Commission ( SEC ) is Gupta’s apparent lack of confidence and his almost deferential manner, often letting Rajaratnam finish the sentences for him.The two who have known each other for over a decade and have been implicated by the SEC in an insider trading case. At one point in a conversation between the two, Gupta asks, almost timidly, for Rajaratnam’s opinion on an offer made by the private equity firm Kohlberg Kravis Roberts (KKR) to Gupta, to join them. And then at the end of the almost 18-minute tape, Gupta veers back to the topic and asks yet again for a second time about KKR. Rajaratnam advises him to go ahead, saying he would do so “in a heartbeat”.Why does Gupta, estimated to be worth over $100 million, and a former head of McKinsey, the world’s most blue-blooded management consultancy need Rajaratnam’s affirmation for a career move?Rajaratnam picked on this insecurity of Gupta. In a taped conversation between Rajaratnam and Anil Kumar, Gupta’s protégé and senior partner at McKinsey, who is the US government’s star witness in the case against Rajaratnam, they discuss Gupta:“But is it really that he was so greedy for the $12 million that KKR has offered him?” Kumar asks on the recording. Rajaratnam says Gupta “ran the numbers” with him, and “it was about $5 million a year with upside”. Later, Rajaratnam speculates on Gupta’s motive in joining KKR: “My analysis of the situation is he’s enamoured with Kravis, and I think he wants to be in that circle. That’s a billionaire circle, right? Goldman is like the hundreds of millions circle, right? And I think here he sees the opportunity to make $100 million over the next five years or 10 years without doing a lot of work.”“At some point, what I worry about is that there can be this massive implosion in him,” Kumar adds, to which Rajaratnam responds: “He didn’t seem comfortable. He seemed like he was tormented, right?” So what was this insecurity that Gupta went through, this inner turmoil that Rajaratnam terms as “torment”?Was it Gupta’s fear of an impending financial turbulence in his life? His lawyer now points to the fact that Gupta lost his entire $10 million investment in the GB Voyager Fund managed by Rajaratnam, at around the same time as the taped conversation between the two. The suave Gupta was sure to have seen the hard times ahead. Was it that his conscience and a life-long commitment to integrity and business ethics were in conflict with his desire to please Rajaratnam and ensure a lifeline to wealth?Or was it the fear of being seen as not as capable of giving away money as making it? Only Gupta knows. In 2001, Gupta helped raise $1 billion in relief funds for the victims of the Gujarat earthquake. He was also active in the America India Foundation (AIF), the best-known Indian American charity in the US. Speaking on the condition of anonymity, a source who is closely involved with the AIF, had high praise and admiration for the way Gupta has helped the organisation grow since its inception in 2001.“Rajat has led the AIF by example. He was closely involved in all the decisions that were taken by the Board, in the operations and in the outreach at fundraising time,” said the source. “He enabled the right kind of philanthropy.” The source, who has interacted with Gupta for several years, terms him as “very affable, thoughtful, profound and insightful”.And like many of his Wall Street colleagues, Gupta is also politically savvy. Over the years, he has been a big contributor to the Democratic Party, giving more than $100,000 to candidates—nearly all of them Democrats.Many in the Indian American community, praise Gupta. “Sincere, sensitive and compassionate,” is how Paul Ahuja, a business consultant says of Gupta, whom he has met a few times at social gatherings. Viresh Sharma, a retired businessman who lives in New Canaan, Connecticut, terms Gupta as a “decent man”.“From what I know of him, he does not have an extravagant lifestyle, does not drive a fancy car, is not at all ostentatious, and does not throw his money around to impress people,” says Sharma. He talks of Gupta’s humility, saying once one of his three daughters had requested Gupta to come to her university and give a talk. Gupta had readily agreed. “He is not the arrogant type,” he says.Others in the community conjecture about the motives that drove him. “Indians have a heightened self-esteem that they can bend the laws here and teach Americans how to make money,” says one businessman on condition of anonymity. “Gupta epitomised that. Indians think they are too smart. That can land them in trouble.”“It was his craving to be in the circle of people like Kravis and Sunil Mittal, the billion-dollar crowd,” says another. “He knew despite his reputation with McKinsey, he could not come close to that kind of a crowd unless he himself made that kind of money.”Was it this that drove his dealings with Rajaratnam? The SEC says Gupta gave away non-public information to Rajaratnam which generated profits and “loss avoidance” of $18 million. In 2008, Gupta took part in a special meeting of the Goldman Sachs board about a possible $5 billion investment by Warren Buffett’s Berkshire Hathaway. That meeting ended around 3:53 pm By 3:57 pm, the SEC says, Gupta had called Rajaratnam and Galleon had snapped up 175,000 shares of Goldman Sachs. The profit the next day: a million dollars.On another occasion, Gupta tipped off Rajaratnam to the fact that Goldman’s results would beat market expectations. In a series of deals based on the tipoff, Rajaratnam apparently made profits of $13.6 million.The strange thing is, Gupta did not seem to profit much from the tips. Some conjecture that he may have passed information to Rajaratnam because of the hope for future profits. If that’s true, and its not at all clear that it is, how much did he expect to make?The title of Vanguard founder John Bogle’s book, Enough, has perhaps a lesson for Gupta. The author got it after he heard a conversation between novelists Kurt Vonnegut and Joseph Heller, at a party by a billionaire hedge fund manager. Vonnegut says to Heller that the manager had made more money in one day than Heller ever made from his novel Catch-22. Heller quips: “Yes, but I have something he will never have: enough.”Perhaps Gupta did not know the word enough. He could pay for it. The torment that Rajaratnam talks about Gupta, may have only just started.