Mind Without Fear

by Rajat Gupta

  I would later learn that Goldman almost didn’t warn me at all. It was my old friend John Bryan—former CEO of Sara Lee Corporation and fellow Goldman board member—who had urged Palm to call me immediately and give me a heads-up about what they’d heard. John and I had known each other for decades; he’d been my client during my time at McKinsey. He didn’t believe for a moment that there was any basis to the idea that I’d been involved in this conspiracy, and his main concern was that my reputation not be damaged and I be given the chance to be proactive and protect it. I was grateful for John’s friendship, but Goldman’s inclination toward reticence was disturbing.

  When I arrived in Boston, after cuddles with my granddaughters, I sat down with Sonu and told her about the call. She looked worried. “Baba, you should do what they say and get a lawyer.”

  “For what?” I asked. “I don’t even know what I’m being accused of!”

  “Of course we know there’s nothing to it,” she agreed, “but you need to protect yourself, just in case. You’re too trusting.”

  On that count, I knew she was right. Maybe it was time to start protecting my own interests—although what they needed protecting from was unclear to me. How was I supposed to stand up and fight, when my adversary was merely a shadow? How could I defend myself, when the threat was still hidden from view?

  3

  Reluctant Resignation

  I have had my invitation to the world’s festival,

  and thus my life has been blessed.

  My eyes have seen and my ears have heard.

  It was my part at this feast to play upon my instrument,

  and I have done all I could.

  —Rabindranath Tagore, Gitanjali, 16

  December 2009

  “Don’t you worry about it; let us worry about it.”

  This seemed to be the catchphrase of my new lawyer, Gary Naftalis—a white-collar defense specialist with a track record of successful cases who had been recommended to me by Greg Palm at Goldman. Indeed, I lost count of how many times I heard those words as 2009 dragged to a close. Gary was a folksy character, whose somewhat disheveled appearance belied his brilliant legal mind. He radiated confidence and kept assuring me that my concern was unnecessary and this situation would all work itself out. I did not find it easy, however, to just hand the matter over to the professionals, let them worry for me, and go on with my life.

  The most frustrating part was feeling utterly in the dark. There was nothing official I could respond to—just rumors that one lawyer had heard from another who heard them from another, none of whom were really supposed to be discussing the case. No one else knew about any of it besides the Goldman leadership and my family—a state of secrecy that was critical for my reputation but difficult for my psychological well-being. It was as if I was living in two parallel worlds—one in which I continued to fulfill my various commitments as a respected elder in the business community and another in which I was slowly but surely being framed as a criminal.

  On January 7, 2010, Anil Kumar took a plea bargain. Clearly the government had convinced him to testify against Rajaratnam in return for a more lenient sentence. Soon after, a superseding indictment was filed, adding two more charges and extending the list of companies in which Rajaratnam was accused of illegally trading. Goldman Sachs, however, was mentioned nowhere in the new indictment, and it shed no more light on the shadowy accusations against me. Whatever the Justice Department thought they had found, it was not enough to warrant a charge. That seemed like a good sign. Perhaps this would all die down once Rajaratnam’s trial was over and I could go back to focusing on the things that mattered.

  Meanwhile, Goldman began conducting its own internal investigation of the matter. My lawyers met with their lawyers and reiterated the story I’d told Palm. I kept inquiring as to the outcome of this investigation, but heard nothing. Frustrated, I went about my business, feeling hamstrung. Why would no one give me any information? I’d heard nothing from the Goldman legal team, from Goldman CEO Lloyd Blankfein, or even from John Bryan. In early March, I was in Florida on a short vacation with my family, when I got a call from my lawyers. The annual Goldman board elections were approaching, and apparently the bank’s lawyers had told my lawyers to inform me that if I was going to run for re-election, they would have to disclose to the board what they knew about the allegations regarding my role in the Rajaratnam case.

  “What about Goldman’s investigation?” I demanded. “Have they come to any conclusions? Does this mean they think I’m guilty?” My lawyers had no answer.

  I was due to return to New York that night to attend a Goldman board meeting the next day. Couldn’t they have given me a little more time to consider this decision? I was reluctant to let the entire Goldman board know what was happening. If word got out that my name had in any way been connected to the case, it would be catastrophic for my reputation, and the more people knew, the riskier it became. My only other option was to withdraw my name and not stand for re-election. Either path felt like a capitulation to an unjust narrative.

  I hated the thought of bowing out, when I hadn’t done anything wrong. Why should I be forced to act like I was guilty, when I’d been charged with no crime? When I met John Bryan for a drink that night, I asked him, “What should I do? Either way, people are going to assume the worst.”

  “Withdraw your name,” he advised. “You can’t afford the reputational damage that will be inevitable if news of the investigation becomes public. Besides, why would you want to serve a company that doesn’t trust you?” He told me that Goldman would like to offer me a consulting contract instead, but it felt like a bribe, so I refused. In hindsight, I should have taken it, and negotiated an exit package. I didn’t even think to cash in the stock options I’d been awarded for my service to the board. (It never occurred to me that the bank would take these away, but they did, relying on some fine print in the contract.) I still saw myself as part of the Goldman team. I hated being pushed around like this, but in the end I just couldn’t see the sense in fighting, particularly when Blankfein had made it so clear he didn’t want me there.

  My relationship with the Goldman chief had never been particularly close. It was his predecessor, Hank Paulson, who had encouraged me to join the board, but in the interim between the invitation and my acceptance, Hank was made treasury secretary and Blankfein took over at Goldman.

  The Goldman board meeting on March 5, 2010 was my last. Before we went in, Blankfein assured me that the reason for my withdrawal would be kept confidential. I announced my decision to the assembled directors, trying to frame it as simply a matter of timing. “It seems like now is as good a time as any for me to go,” I told them, adopting what I hoped was a philosophical tone. The whole thing felt like a charade. The other board members looked surprised. Blankfein somewhat awkwardly thanked me for my service, and that was the end of my tenure on the Goldman board.

  Later, I would learn that, as soon as I exited the room, he told the assembled directors the real reason for my departure, breaking his promise to keep it confidential. I might as well have stood firm and let him carry out his threat to disclose the allegations against me to the board—the result would have been the same. The other board members were my friends and I wish I had simply trusted them and leveled with them myself. At the time, however, I thought I’d done what was necessary to protect my reputation.

  I should have known this was a fallacy. Such short-term expedient moves are invariably wrong moves, and it went against my commitment to honesty and transparency. The story was going to come out sooner or later, and when it did, the board members would probably think worse of me as I’d kept it from them.

  Trial by Media

  As the plane slowly made its final descent, I looked out the window at the familiar smoky skyline and bustling chaos of Mumbai. I could almost hear the cacophony of car horns, bicycle bells, and human voices. And I could imagine that somewhere down there, on a protected rooftop above the city str
eets, a handful of young boys were gleefully flying kites, as my childhood friends and I had loved to do. After the drama with the Goldman board a month earlier and the ongoing tension of the past few months, I was happy to be back in my homeland and far away from it all.

  It was early April 2010, and I had come to India for a couple of days of fieldwork with fellow P&G board members before their annual board meeting in Singapore the following week. Maybe the distance would help me to finally put the worrying rumors behind me, I thought to myself as the wheels touched down. And then I switched on my phone.

  “We’re running a story tomorrow about the fact that you are under investigation for allegedly providing tips to Raj Rajaratnam about Goldman Sachs.” The voicemail was from a reporter at the Wall Street Journal. She had left a number, and asked me to call before a certain time if I had any comments, but by the time I got the message it was already too late. The story had gone to print.

  “Goldman Director In Probe,” declared the headline.1 My inbox and voicemail were full of concerned messages from friends and colleagues who had read the story on the front page of the morning paper. The article repeated the same vague allegations I’d already heard, with no more detail on the specifics. Of course, the reporter didn’t name the “people close to the situation” who had provided the information, and I’ll never know for sure where the leak came from. But if the Securities and Exchange Commission (SEC) or the Justice Department* wanted to plant seeds of suspicion in the public mind—and in the minds of future jurors—they couldn’t have chosen a better way to do so. With the wounds of the financial crisis still raw—beloved homes foreclosed, jobs lost, families struggling, futures uncertain—it wasn’t difficult to convince people to think the worst of anyone connected to the financial industry. In fact, one survey on community attitudes conducted in 2009 found that 74 percent of jury-eligible New Yorkers blamed “senior-level corporate executives” acting with “greed and carelessness” for the economic crisis, and almost half the respondents believed that if the US government accused a senior-level corporate executive of committing financial fraud, he or she probably did it.2

  Despite this climate of suspicion, I was determined not to start acting like a guilty man. I wanted to maintain a semblance of normalcy in my professional life. I flew on to Singapore for the board meeting, accompanied by former American Express CEO Ken Chenault, who was also a P&G director. He was extremely supportive, offering to help in any way he could. The other P&G board members were also understanding, but I knew that not everyone would react this way. There were plenty who would be quick to judge. As Jim McNerney, a fellow P&G director and former McKinsey guy, said to me at the time, “Now you’ll find out who your real friends are.”

  Many people assumed that following the article, I would resign from all of my board seats, but I resisted this pressure. P&G, Genpact, Harman International, and AMR Corporation (the parent company of American Airlines) were all aware of the situation and had made it clear they considered me innocent and wanted me to continue to serve as a director. P&G CEO A.G. Lafley and Genpact CEO Pramod Bhasin even spoke out publicly in my defense. Every one of the nonprofits I served felt similarly—from the Gates Foundation to ICC.

  McKinsey had begun conducting an internal inquiry, and I spent many long hours meeting with their team and sharing everything I knew about Kumar and Rajaratnam, as well as my own story. My lawyers, meanwhile, were trying to get more information on what, if anything, the SEC or the Justice Department thought they had on me. Through some legal back channels, they were able to learn a little about the contents of the wiretaps.

  It appeared that there were two tapes in which Rajaratnam mentioned Goldman, one being the September 2008 recording of him telling one of his traders that he’d heard “something good” might happen to the bank, and another, from about a month later, in which he told one of his lieutenants that he’d been tipped off about a shortfall in Goldman’s earnings. In neither of these tapes was I named as the source, but some people clearly wanted to believe that I was. My lawyers, however, were quick to assure me these tapes had no legal merit. Not only were they vague, they were hearsay, which was not allowed by the rules of evidence.

  “What about calls between Rajaratnam and me?” I inquired. “If they’ve been tapping his phones all this time, surely there would be recordings that show the kind of things we actually discussed?”

  It turned out that there were seven recordings that featured my voice, of which six were simply voicemail messages requesting a call back. That was no surprise—in my attempts to recover my Voyager investment, I’d left dozens of such messages for Rajaratnam, and he rarely returned my calls. There was one longer recorded conversation from July 2008, the lawyers told me, but it contained nothing to do with insider trading. I did not particularly like the idea that someone had been secretly recording our call, but I knew I’d never given Rajaratnam any tips. What could the tape possibly contain that would incriminate me?

  Lastly, we learned that they had call records showing that I’d placed calls to Rajaratnam on the days in question—calls that had not been recorded but which they were imagining contained tips. I knew, of course, that this wasn’t the case—there was only one reason I was calling Rajaratnam in the fall of 2008, and that was the Voyager investment.

  My lawyers continued to seem upbeat. If this was all the government had, they told me, it wasn’t enough to make a case. A couple of conversations that were clearly hearsay and never mentioned my name, plus a couple of phone records, does not amount to anything close to proof. This seemed reasonable enough to me. I also knew, as I reminded my lawyers, that Raj had plenty of other connections at Goldman—he was one of their best clients, and had hired numerous former Goldman people to work at Galleon. Any number of people inside the bank could have been the actual tipper.

  The spring and summer of 2010 was a strange and disconcerting time. I felt like I should be defending myself, yet I’d still not been charged with any crime. My lawyers repeatedly reached out to the SEC, asking them to let us know if I was under investigation so I could cooperate. But we heard nothing. Then, in August, we abruptly received SEC subpoenas for information about my investments and my contacts. After some negotiation, we agreed to hand over relevant parts. Things went quiet again, but I was under no illusion that this was a good sign. “Don’t you worry,” Gary told me. “Let us worry for you.” I worried anyway—but not as much as I should have.

  In November, the SEC informed my lawyers they wanted me to come in and testify. I was relieved—finally I could tell my side of the story and straighten out this misunderstanding. My lawyers, however, were not happy about the timing. Rajaratnam’s trial was scheduled for January, and they were concerned that if I testified to the SEC, I’d end up getting dragged on to the stand as a defense witness. The trial had all the makings of a media spectacle, and the last thing I needed was to play a starring role. So we told the SEC I’d be happy to testify, but requested that it be postponed until after the Rajaratnam trial was over.

  They refused. They also refused to give us any assurance that my testimony would be kept sealed. A date was set for December.

  “Same Answer”

  “I’ll just tell them the truth,” I told Gary. It was early December 2010, and we were meeting to prepare for my SEC testimony. “If they insist on bringing me in, I’ll just explain what those calls to Rajaratnam were actually about.”

  But Gary was concerned this approach was too risky. We had not yet seen all the evidence, so we had no idea what they might bring up, he explained.

  “What could they possibly have?” I demanded. “There is no evidence because there was no crime! And if I tell the truth, I don’t have anything to fear.” Their argument simply didn’t make sense to me, but Gary was adamant. The best strategy, he advised me, was to exercise my constitutional right against self-incrimination; in other words, to take the Fifth.

  “That will just make everyone even more convinced I’m
guilty!” I objected. I couldn’t see how this would be any better for my reputation than telling the truth. I could just picture the headlines: “Gupta Takes the Fifth: What Is He Hiding?”

  Gary offered me an alternate way to say it: “Upon the advice of counsel, I respectfully decline to answer the question at this time based on my right under the United States Constitution not to be compelled to be a witness against myself.”

  I looked at him skeptically. “I’m going to need to write that down.” So I did, and when the day of the testimony came, I took the piece of paper with me. We were shown to a small, nondescript, rather shabby room, and sat down. Soon, three SEC agents entered, and introduced themselves as Sanjay Wadhwa, Jason Friedman, and John Henderson. I knew that Wadhwa, a fellow immigrant, was a Punjabi, like my mother. Under different circumstances, I would have liked to ask him about his family and his history. Instead, I took a seat, with the piece of paper in my pocket for reference if needed, and waited for the questions to begin.

  I don’t recall the opening question, but my answer was already prepared. I used the same phrase for each of the first few questions, feeling rather foolish, until Henderson suggested that for the sake of expediency I could simply abbreviate it to “I take the Fifth.”

  Gary shook his head. “I don’t like that formulation.” So they agreed I could simply say “same answer,” which I did to every one of their fifty or so questions. It seemed a pointless and ridiculous exercise, and it felt terrible. Never in my life had I refused to answer when someone asked me a direct question, no matter what the consequences. I conceded to my lawyers’ insistence that this was the best course of action, but it made no sense to me. In hindsight, I think I made a mistake. I should have told my story. At least then they would have known the facts from my perspective.

  That Christmas was a somber one in our home. Although we are not Christians, my family had always enthusiastically embraced the holidays of our adopted country, and Christmas was traditionally a rowdy affair with a house full of family and friends. As 2010 drew to a close, however, no one really felt like celebrating. I was exhausted by the long-drawn-out game of cat and mouse with the SEC, and still frustrated by the ongoing lack of information. I was moving through my days in a kind of trance, feeling strangely disconnected from the events unfolding in my life. Try as I might, my usual strategic thinking abilities eluded me. It was hard to devise any kind of rational response to such an elusive and unpredictable adversary. I felt as if I were playing a chess game in which I couldn’t see my opponent’s pieces, and in which the rules were apt to change at any moment.