by Rajat Gupta
When it came to real friends, there were none more loyal and supportive than the Indian entrepreneur P.C. Chatterjee, whom I’d known since we hired him at McKinsey in the 1970s. I also relied on the group of friends I liked to call my “breakfast club”—my childhood friend Anjan Chatterjee, Rakesh Kaul from IIT, former McKinsey partner Atul Kanagat, and businessmen Sreedhar Menon and Anil Bhandari. Along with PC, this group of incredibly busy people would make time to come together regularly and offer their moral support. I don’t know how I would have gotten through those difficult weeks and months without them. I was also grateful to my IIT friend Raji Pawar, who was especially supportive, and my friend Shiv Nadar, one of India’s most prominent businessmen, who made a point of inviting me to his birthday celebration in Istanbul, sending a clear message to many of our mutual acquaintances that he and his wife, Kiran, were not allowing the charges to change their friendship with Anita and me.
During this time, I drew on my spiritual strength and remembered what my father had taught me. I practiced letting go of attachment to people, titles, and institutions. I reminded myself that the essence of who I am is not defined by these things, but by caring for others, doing the right thing, and being true to my values. I cared deeply for the institutions I’d built and stewarded, and it was hard to let go. Sometimes the regret and frustration were overwhelming. But I drew comfort from knowing that I had not built these institutions and relationships for my own glory, but for the good they might bring to the world. If detaching myself from them now would help them to remain untarnished by my troubles, I would do it gladly and with grace.
Turning the Tables
My legal case crawled forward. The SEC charge against me was an “administrative” one—a civil charge. It was the first insider trading case to be charged in this way, thanks to the recent Dodd-Frank act, which extended the SEC’s power to try insider trading cases against non-regulated persons such as myself* in its administrative court, rather than the Federal District Court, the usual venue for such cases. That meant that the SEC would essentially be prosecutor, judge, and jury—and they obviously came with a built-in bias. This seemed unfair to me—what hope did I have of clearing my name in what was little better than a kangaroo court, especially considering that the SEC had already ignored my Wells submission? As many people have commentated, the administrative court gives the SEC a significant “home court advantage.”1 Every other one of the twenty-eight Galleon-related cases had been tried in federal court. Why was I being singled out for disparate treatment?
Gary was furious at this situation when we first met to discuss the charges, back in March. He was determined to find us a legal response. I remember the moment when the idea struck him: we should sue the SEC. The way they were treating me was unconstitutional. They were taking away my right to equal protection under the law by denying me a jury trial.
There was a stunned silence in the room. Sue the SEC? It was an audacious suggestion, but the more we entertained it, the more appropriate it seemed. Plus, it just felt good to finally be taking action and going on the offensive. Maybe we could turn the tables on the people who seemed so intent on destroying everything I’d built. Gary thought we had a fighting chance, particularly if we could get the case in front of Judge Jed Rakoff, who had presided over many of the Galleon cases. He might be one of the few judges who had the guts to take on the SEC if they were overreaching.
Others I consulted were surprised by the idea—it was highly unusual for anyone to sue the SEC, and unheard of for anyone to win. “Negotiate a settlement,” they advised, “before it’s too late. Plenty of people pay SEC fines and continue their careers without too much damage.”
But I was frustrated by the ongoing presumption of guilt that I felt had been set in motion by the press and was being reinforced daily by the prosecutor at Rajaratnam’s trial. I didn’t want to take a defensive stance, make a deal, pay a fine, and get a slap on the wrist for something I hadn’t done. I wanted a chance to set the record straight. My legal team seemed energized by the novelty and boldness of the idea. I agreed to sue. Our complaint argued that in addition to depriving me of my constitutional right to equal protection, the SEC was attempting to apply Dodd-Frank retroactively, since the incidents in question occurred before the law was passed. After laying out our case, we concluded, “the only plausible inference is that the Commission is proceeding how and where it is against Mr. Gupta for the bad faith purpose of shoring up a meritless case by disarming its adversary.”2
For a brief moment, our unorthodox strategy seemed to be working. We got Rakoff as judge. The SEC moved to dismiss our charges, but at the July hearing on their motion to dismiss, the tide seemed to turn in our favor.
“A funny thing happened on the way to this forum,” Judge Rakoff began, outlining the unusual sequence of events that had led to this day, and seeming to acknowledge and perhaps even appreciate the audacity and logic of our “well-pleaded” case, as he described it. He seemed to take some satisfaction in thwarting the SEC’s attempt to avoid bringing my case in his court, which he described as an “exercise in forum shopping.” After carefully refuting each of the SEC’s arguments for dismissal as being without merit, he concluded that in this unusual case, “there is already a well-developed public record of Gupta being treated substantially disparately from twenty-eight essentially identical defendants, with not even a hint from the SEC … as to why this should be so.”3
With that, he ruled that our suit could continue. Now, we could proceed to discovery, and perhaps find further evidence that the SEC and the Justice Department were trying to construct a case against me without sufficient evidence to warrant it. The SEC threatened to appeal and tie us up in a long-drawn-out battle. Then, in August, they abruptly dropped the charges against me (although reserving the right to charge me again), and we, in turn, withdrew our suit. My lawyers were elated—their gutsy move had worked and they felt they had made legal history. I couldn’t let myself feel relieved, however. It just didn’t seem plausible that the nightmare was over. And sure enough, the reprieve did not last. Rumors that the government intended to press criminal charges grew more persistent.
My lawyers began directly petitioning the USAO, attempting to lay out a convincing argument for why, in Gary’s words, there was “no basis for a rush to the courthouse.” By this point, I’d also retained the services of Mary Jo White, a former US Attorney herself, who had hired Bharara and knew the Justice Department intimately. She joined the team as an advisor and was present for a series of meetings at the USAO, culminating in a face-to-face meeting with Bharara himself. I was not present for this meeting, but the lawyers seemed encouraged. He listened carefully to their arguments, they reported.
Meanwhile, there was another troubling twist to the story. From the beginning, I’d told my lawyers that Ravi Trehan was going to be an essential witness. He was the one person who knew the whole Voyager saga, and could testify to the slow disintegration of my relationship with Rajaratnam beginning in the spring of 2008 and coming to a head well before the alleged tipping. In early conversations with my lawyers, he confirmed the timeline I’d laid out. However, in the summer of 2011, as we prepared for our meetings with the USAO, Ravi proved difficult for my lawyers to contact. Eventually, I called him myself, and he assured me that he was willing to testify. He also told me that the government had not interviewed him.
My lawyers persisted in their efforts to get a meeting with him, but soon learned some worrying news: Ravi was now represented by a former USAO lawyer, and had been in contact with the government for some time, despite his protestations to me. He continued to avoid meeting with my lawyers or speaking with me, but indirectly he seemed to be sending a clear message: he did not want to testify, and if forced to do so, it would not be favorable to me. He claimed to no longer remember the dates of the sequence of events in 2008 that was so critical to my defense. I reached out to our supportive mutual friend Rana Talwar to ask him to speak to Ravi and pre
vail upon him to simply tell the truth, but his attempts came to nothing. This was a devastating blow. Without Ravi to testify as to the timing of the Voyager affair, the jury would have only my testimony to go on, perhaps supported by my financial advisor Greg Orman, the only other party to the events in question.
I’ve never learned what they found against Ravi to use as leverage and convince him not to stand up for me, but I’ve no doubt they had something. Why else would one of my oldest friends desert me at such a critical moment? I still wonder, if left alone, what he would have done, and I believe he would have stood by me. I also realized, too late, that we had made a strategic error in agreeing to the meeting between my lawyers and Preet Bharara. They’d presented the case we had, of which Ravi was an essential part. We’d told Bharara exactly how to undermine our defense.
On October 13, Rajaratnam was due to be sentenced. The press had been speculating ever since the trial ended: Would the judge make an example of Raj and give him the twenty-four years the prosecutors were seeking? Or would they listen to his lawyers’ pleas for leniency given his ill health and the nonviolent nature of his crimes? Raj suffered from severe diabetes, and his lawyers’ claim that an extended stay in prison would amount to a death sentence was not entirely exaggerated. At fifty-four, he must have known it was possible he would live out his life in jail.Before a packed courthouse with hordes of press waiting outside, Judge Holwell sentenced Rajaratnam to eleven years—the longest sentence ever handed down to a convicted insider trader, though less severe than the prosecutors had hoped.
When I heard the news, I didn’t know what to feel. Raj deserved a serious punishment, but this was clearly disproportionate. Plus, there was no doubt that this sentence would embolden the prosecutors. And it was all too clear by this point that I was their next target.
Diwali
For Hindus, the month of Kartik marks the end of the summer harvest and the beginning of the dry season. It’s a holy month in my homeland, and on the night of the new moon—known as amavasya, the darkest night of the Hindu lunisolar calendar—millions of Indians celebrate Diwali, the festival of lights. In 2011 Diwali fell on October 26. And it was on this day—traditionally signifying the victory of light over darkness, hope over despair—that Bharara, a fellow Indian, chose to indict me on charges of insider trading. Although he later denied it in interviews, claiming to have been unaware of the significance of the date, I doubt the timing was an accident. It was like arresting a Christian on Christmas Day, or a Jew on Rosh Hashanah.
The day before, I’d had a premonition of impending doom. Anita tried to cheer me up, suggesting that we take a scenic drive with Avinash and Madhuri. I didn’t think even the brilliance of the New England fall could lift my spirits, but I didn’t have the energy to argue. We had barely reached the freeway when my phone rang. Pulling over, I took the call and Gary informed me that I was to surrender to the FBI the following morning and be indicted on criminal charges of insider trading.
One by one, I called the rest of the family and told them the bad news. My daughters each dropped whatever they were doing and drove out to our family home in Connecticut. My younger brother Anjan, a doctor, was living and working in Manhattan, and he and his wife, Mala, also came to join us. The phone rang all evening, as word got around to my extended family and friends. In the midst of it all, I felt strangely calm, reassuring everyone that I would be fine. I had known this day would come. It had seemed inevitable for some time. There was no reason to be shocked or overly emotional. I moved through the evening in a trance-like state, as if distanced from the emotional tumult that everyone else was experiencing.
One small mercy was that I was spared the 5 a.m. perp walk for the television cameras. There were no FBI agents banging on my door, no handcuffs, and no press, aside from a lone photographer who leapt into my driveway as we pulled out before dawn, almost causing me to hit him. Anita, her brother Arvind, and brother-in-law Ajay accompanied me to the city, but I insisted they stay at the apartment. I didn’t want them to endure the media frenzy that I was sure awaited me at the FBI offices downtown.
My lawyers arrived to pick me up a little before seven. We were silent as the car crawled slowly through the city streets, already thronged with people on their way to work. As I looked at the sea of strangers, clutching coffees and briefcases, for a brief moment, I let myself imagine that I was one of them, on my way to the office, dressed in suit and tie, ready to spend a full and productive day serving clients and mentoring colleagues. But I knew that I’d never have a “normal” life like that again. Reality quickly reasserted itself as the car passed McKinsey’s Park Avenue offices and carried me downtown.
Since we arrived very early at the FBI offices, thankfully there was no press. My tie and belt were taken away as a safety precaution, and I was presented with my first pair of handcuffs. The cold steel against my wrists evoked a surge of rage and shame, breaking through the strange calm that had stayed with me throughout the night. I asked my lawyers to take the first photograph of me in handcuffs. Then I was fingerprinted and taken through some other procedures before being marched back to the car, still cuffed, and driven to the courthouse. Now the press was out in force, and we entered through the basement to avoid the cameras.
I was put in a large holding cell with a collection of rather intimidating guys, mostly in on drug charges. They all seemed to know each other, and I wondered if they were members of a gang. Eventually, I was moved to an individual cell, and then, after an hour or more of waiting, I was taken to the magistrate to enter my plea of “Not Guilty.” There had never been any question that this would be my stance. I would vigorously defend my innocence.
After my arraignment I was released on a $10 million bail, secured by my home. My passport was confiscated and I was told that I was barred from leaving the country until further notice. I also learned from my lawyers that the SEC were exercising their right to charge me again and had filed a new set of charges that day, echoing the criminal indictment. I was not in the least bit surprised: I’d challenged them to take my case to the federal court, and now they would get the chance to do so. Wearily, I made my way back uptown to our apartment.
My family was all there, waiting for my return. I didn’t say much, and they didn’t ask. Together, we drove back to Connecticut, mostly in silence. At home, Madhuri had cooked a festive meal and we sat down together for a family dinner. We lit candles for the holiday, but they couldn’t dispel the darkness that I was feeling. Evoking the rituals of India only served to highlight my sudden disconnection from the culture around me. America had been good to me—welcoming a young immigrant into its finest educational and business institutions, entrusting me with positions of influence, providing freedom and opportunity to my family. But now it felt as if the country we’d all called home for so long had turned against us. Somehow, my name had become synonymous with the worst kind of greed and privilege in the public eye.
It didn’t matter that I was hardly involved in Wall Street, let alone that insider trading had nothing to do with the financial crisis. It didn’t matter that I’d never sought power or influence for its own sake, or that I’d spent decades working to improve global health, education, and free trade. Bharara’s strategy was working: go after the hedge funds and their circle, play up the story in the press, and maybe no one would notice that the big banking executives were continuing to walk free.
Seeing Anita’s usually stoic expression giving way to despair, I shook myself out of the spiraling anger, resentment, and gloom that threatened to suck me down. “We can’t allow them to destroy our holiday,” I said. “No matter what people do to us, we can always choose to respond with grace and spiritual strength.” We rejoined our daughters and went to the puja room to say prayers. As I watched the flickering flames, my spirit of defiance began to rekindle. I would not be broken by this. Mind without fear, head held high. If I were to face a judge and jury, so be it. This time, at least, I would have the opportunity to
defend myself.
_______________
*People not associated with investment advisors, brokerage firms, or other registered entities.
Part II
Karma Yoga
You have the right to work, but never to the fruit of work.
—Bhagavad Gita, 2:47
6
A Dark Diwali
“Who is there to take up my duties?” asked the setting sun.
“I shall do what I can, my Master,” said the earthen lamp.
—Rabindranath Tagore, Stray Birds, 153
The day of my arrest was not the first time that the festival of lights turned into a dark day for me. In fact, for most of my life, the joyful Diwali celebrations have been tinged with sadness, because it was on this day in 1964 that I lost my father.
I was fifteen years old. My sisters and I had recently returned to our home in Delhi after a family vacation, while our parents stayed a few extra days in Kolkata with my youngest brother. A sharp knock on the apartment door broke the quiet of the afternoon. The man looked vaguely familiar; he was someone from my father’s office. “You must go to Kolkata right away,” he told us, his face etched with concern. “Mr. Gupta is very sick.”
We were given plane tickets and told to quickly pack some clothes. A car was waiting outside to take us to the airport, and our aunt was already inside. We had never traveled by air before, but what should have been an exciting prospect—my first flight—only served to underscore the seriousness of the situation. My family would never have gone to such expense unless time was critical.
My sisters and I barely spoke a word during the flight, sitting in stunned silence, each afraid to voice our fears lest it make them more real. Baba had been sick on and off for many years, but he had always recovered. This time, however, it felt different. It was dark when the plane began its descent into Kolkata, and the Diwali celebrations were beginning. Sitting in the window seat, I could see fireworks flaring above the streets, looking strangely small from my lofty vantage point. As we skimmed the city, I began to make out dots of light from the millions of little earthen lamps that lined the rooftops for the festival. My younger sister Kumkum clutched my arm as the aircraft wheels struck the tarmac and the heavy plane lurched to a halt. We grabbed our hurriedly packed bag and were carried through the busy airport by the momentum of the crowd until the familiar face of our uncle, Choto Kaka (meaning father’s youngest brother), appeared out of the sea of strangers. I didn’t want to ask the question, but I had to know. “What’s happening with father? Is he alive?”
