Mind Without Fear

by Rajat Gupta

  Even before I knew this backstory, I was furious. The loss of the money upset me, but it was Raj’s duplicity that really hurt. Ten million dollars was a large sum, for sure, but everyone was losing money in those days, and Voyager had been a risky investment in the first place, so if I’d lost the money fair and square, I’d have been philosophical about it. What upset me was that Raj’s actions had increased the risk, without my knowledge, and I’d paid the price. I’d wanted to give him the benefit of the doubt, hoping there was a reasonable explanation for all this. Now it was clear why he had so intently avoided all the calls, emails, and requests for information over the past months. He’d been stalling, knowing that the fund was in trouble but hoping he could find a way to hide it from me. I held him accountable for the loss and became even more determined to file a lawsuit against him. All of this was going through my mind during the period in which the government alleged I was tipping him—how could that possibly make sense?

  Our relationship was strained, to put it mildly, but Raj tried to placate me, suggesting, as he’d planned with his colleague, that he could make a deal with the banks to recoup our money.

  “All the banks are taking haircuts on loans right now,” he declared, with his usual swagger. “I’ll get our equity back.”

  I hoped he was right. My financial advisors confirmed that the banks were making such deals, so perhaps Rajaratnam could pull it off. I decided to hold off on my plans to sue in case we could resolve things. I still believed that he might have the money and decide to give me my share as he should have done in the first place. I’d never sued anyone in my entire career, and I didn’t know where to start. Plus, I had no time to deal with it now; the next day I was flying to Florence, Italy, for a McKinsey Global Banking CEO Roundtable, and then on to Barcelona, for the firm’s annual directors’ conference.

  Throughout these weeks, I, like everyone in business, followed the news closely as the economy struggled to right itself. Goldman, buoyed up by Buffett’s billions, was doing better than some, but still flailing. On October 3, President Bush had signed off on the Troubled Asset Relief Program (TARP), authorizing $700 billion in bailouts. The stock market responded with its worst week in seventy-five years. More bailouts followed. The markets continued to churn. On October 23, 2008, I was flying back to New York from Barcelona, planning to make a brief stop at home before heading to Rhode Island for a Brown University parents’ weekend with my youngest daughter. Upon landing, I picked up a copy of the Wall Street Journal and read a report that, according to an “unnamed source,” Goldman Sachs was planning to lay off 10 percent of its staff.4 So I was not at all surprised when I checked in with my secretary and heard that Blankfein had called a last-minute board meeting later that afternoon to discuss this unfortunate situation.

  When the meeting ended, no doubt I called Renee and asked her to go over the call list. I’d have been eager to deal with important matters before jet lag kicked in and reluctant to have them bleed over into my weekend with Kushy. Once again, Rajaratnam was number one—having just returned from several weeks away I wanted to know what was happening in his conversations with the banks regarding Voyager.

  I don’t remember the exact conversation, but the general theme of our communications during that period was me pressing for a resolution but trying to be courteous, not wanting to alienate him, and him asking me to be patient, insisting he was working on it. The morning after that particular call, however, he dumped a large amount of Goldman stock, avoiding significant losses. Once again, he was caught on a wiretap bragging to a colleague that he’d heard from somebody on the board that Goldman was losing $2 a share and he was “gonna whack it.” This incident constituted Count 5 of the charges against me, with the prosecutor alleging that I was that “someone” who had hurried to pass on valuable secrets.

  Raj didn’t get that information from me. In fact, the board had not even discussed earnings on the call. It had been a last-minute “posting call” to discuss the impending layoffs and deal with the fallout from the Wall Street Journal leak. Besides, the number Raj quoted was not even accurate—we would later learn that, according to the profit and loss (P&L) statements from October 22, Goldman was losing $1.75 per share. No one rounds up those kinds of numbers.

  There were no minutes from the call, so I had no way to prove this other than the statements of other board members, who did not seem to recall the details. In his SEC deposition, Blankfein had been hopelessly vague about this call, but had tried to claim that it was customary for him to always discuss earnings. Either way, in this instance, Rajaratnam didn’t need an insider at all to have known that dumping the stock was a wise move—the leak about the 10 percent staff cut had made that clear. For the prosecutor, however, it was enough of a fit for the narrative he was trying to build.

  I met with Rajaratnam once more at the end of October, trying to ascertain whether he really was working out a deal or just stalling again. A few days later, I left for an extended trip to India, with the Voyager matter still unresolved.

  Thanksgiving that year was another gloomy gathering. By this point, the whole family knew about the Voyager situation. A more personal sadness also tinged that particular holiday every year—the absence of my nephew Sanjoy, known as Partho, Didi’s only son. He had been like a brother to my girls and he and Sonu had made it something of a tradition to cook Thanksgiving dinner together. In 2002, Partho had succumbed to an acute form of leukemia, aged only twenty-six. We could never celebrate Thanksgiving without feeling his loss anew.

  My sixtieth birthday came soon after, on December 2, but none of us really felt like celebrating. The rest of the year was an endless list of meetings, much of which has blurred in my mind. One event that stands out, however, was a Goldman board meeting in early December where we learned that the bank was losing close to $5 a share. This was a much greater loss than the October loss that I was being charged with tipping Rajaratnam about. Surely if there were a “pattern,” as the prosecutor alleged, I would have made sure to give Raj a heads-up about this event? But there were no calls, meetings, or any other communication between us. At this point, I wanted nothing to do with Rajaratnam. I wished I could just forget about him altogether, but I still hoped to get my money out somehow, and I was still considering suing.

  No amount of busyness could shake the dark cloud that seemed to hang over me. It wasn’t just the money; it was the sense of having been taken advantage of. This may seem strange to say, but I really had not believed that this would happen to me. In retrospect, I can see that McKinsey, where I had spent my entire career, was an unusually principled, high-minded environment, and I had been to some degree sheltered from the more cutthroat corners of the business world. Of course, I knew that there were all kinds of people in business, and things went on that weren’t always above board, but to be honest, I rarely encountered any of that personally. I had built a career on being trusting, open, generous, and believing the best of people. My wife, my daughters, and many of my friends had warned me, teased me, and at times despaired for me, but it had always worked out. Now, Rajaratnam’s actions shook me more deeply than I could have predicted because they seemed to strike at the essence of my worldview. Suddenly I was awash in self-recrimination about being too trusting and too busy to keep closer tabs on my investment. Perhaps, too, I was feeling a premonition of what was to come.

  It was in this melancholy state of mind that I sat down to lunch with an old friend early in January 2009. I’d known Ajit Jain since he joined McKinsey in 1980. He’d left some years later to work for Warren Buffett’s Berkshire Hathaway, and was now Buffett’s right-hand man. We’d always stayed in touch and saw each other regularly, but I had not confided in him about my troubles with Voyager. Only a few close friends knew what was going on. That day, however, I could think of little else, and when Ajit gently inquired as to what was weighing on me, I told him the whole sorry tale. He expressed his shock and sympathy, and I felt a little better, at least temp
orarily.

  Later that month, I flew to Saudi Arabia for a speaking engagement in Riyadh, and then on to Switzerland to attend the WEF meeting in Davos. I always enjoyed the conference and had played a key role in shaping the organization through many years on the board. On Thursday, January 29, I called in to a P&G audit committee meeting during which a decline in sales growth was discussed. Later that day, I received a message to call Rajaratnam. I was still holding out hope that his discussions with the bank might bear fruit and thought that maybe this would be the good news I was waiting for. But all he had to tell me was that it had come to nothing. The money was gone.

  Soon afterwards, Galleon shorted about 180,000 P&G shares, making more than half a million dollars in profit. Again, the government alleged that I was the source of this information, which I was not. This incident was the subject of Count 6, the final charge.

  After that call, it was clear that Rajaratnam had no intention of making things right. Up to this point, I had not challenged him about the redemptions and commissions, afraid of antagonizing him further and jeopardizing my fragile hope that he might find a way to recoup my capital. But now that hope was gone, so I confronted him. He was defensive, insisting he’d had a right to take his money out. Legally, he did, but to not inform me or give me the opportunity to do the same was clearly not in the spirit of the agreement. I was still considering suing and even discussed it with Greg Orman and an attorney sometime in January. But I couldn’t seem to find the energy to fight. Since I’d resigned myself to the fact that the money was gone, the best I could do was learn from my mistakes and be more cautious in the future about who I trusted. Rajaratnam, I resolved, would never be a part of any business I was involved with. Our story had come to an end—or so I thought. Nine months later, he would be thrust back into my daily awareness with the news of his arrest and everything that followed.

  Unprepared

  As my court date drew close, I told this story to my lawyers again and again, trying to recall as much detail as possible, as well as to contextualize the events within the realities of my life. With the trial just days away, I sat in the office poring over my calendars late into the night. It was emotionally exhausting work—I couldn’t help but second-guess the decisions I’d made and inwardly berate myself for being so trusting. I was also losing faith in the system, losing confidence that I would be given a truly fair trial. But I tried to put aside my feelings and imagine how my story would sound to a jury hearing it for the first time. Surely when they heard about the incidents in context, the government’s allegations would appear in a whole new light.

  On the Friday before my trial, I was still preparing, worried we’d left it too late or hadn’t done enough. But there was little point in dwelling on that now. I would try to put it all out of my head and enjoy a last quiet weekend with my family. Before I could go home, however, there was one last thing I needed to do.

  Alone in my temporary office at the law firm, I got out my computer and created a new email message. In the address field, I entered the names of all my family, friends, and colleagues—dozens and dozens of people who I knew would be thinking about Monday’s trial, studying every news report, and wondering how I was doing. Looking at their names brought up a surge of emotion. These people were what mattered to me—not money, not acclaim, not attaining some elite status, as the prosecutor was trying to suggest. My battered reputation was not an abstract idea to me—it was contained in these relationships that I’d built so carefully, over decades. Thanks to the damage already done, there were countless names I could no longer include on my list of friends.

  I knew that my real friends would stand by me, no matter what. So many of them had called, written, or visited since the charges, assuring me of their continuing support. Some had even created a website where those who knew me could write their testimonies to my good character, in an attempt to counteract the negative portrait painted by the media. My former McKinsey colleague Atul Kanagat, who managed the site, had assembled an amazing list of contributors. Every one of these people I was proud to call my friend, and it was all of them that I felt I should write to on the eve of my trial.

  “As I sit here reflecting on the last year,” I typed, “I am filled with emotions. The overwhelming one is God is putting me through a test, and my duty is to do the very best I can and be prepared to accept whatever outcomes. I know I have done nothing wrong and expect to be fully vindicated.”

  _______________

  *The charges against me when I was arrested in October 2011 related only to two incidents, September 23, 2008, and October 23, 2008. However, the prosecutor had spun several “counts” out of each. We challenged this “surplusage” of charges in a pretrial motion. The government then filed a superseding indictment in January 2012, which added two new charges, March 7, 2007, and January 29, 2009. The 2007 charge was the thinnest of all, with not even a phone record as evidence, but it was important for the prosecutor to try to extend the date range back to a time before my conflict with Rajaratnam over Voyager.

  14

  A Cropped Portrait

  That side of our existence whose direction is towards the infinite

  seeks not wealth, but freedom and joy. There the reign of necessity ceases, and there our function is not to get but to be.

  —Rabindranath Tagore, Sadhana

  New York City, May 21, 2012

  “Gupta Cannot Take a Mother Teresa Defense.”

  I’ve shared headlines with many noble human beings in the course of my long career in business and philanthropy, but never before had my name been paired with Kolkata’s saintly nun. And yet on the eve of my trial, her name was on everyone’s lips along with mine, thanks to a colorful analogy used by Judge Rakoff during a hearing just a few days earlier.

  “If Mother Teresa were charged with bank robbery, the jury would still have to determine whether or not she committed a bank robbery,” he’d declared, as part of a warning to my lawyers against overemphasizing or even discussing my philanthropic work. I certainly didn’t consider myself a Mother Teresa, but this move to curb any mention of my decades of engagement in humanitarian causes was frustrating, to say the least. Gary argued vigorously that it was unfair, that if the government was seeking to paint me as greed-driven, I should be allowed to correct that perception with the references to reality of how I’ve spent much of my time and energy. Rakoff, however, was not just unmoved but sarcastic in his comments.

  This was not the only significant pretrial ruling that went against us. Rakoff had also denied our motion to declare the wiretaps inadmissible. In particular, we were referring to the two recordings in which Rajaratnam tells one of his traders that he received information about Goldman from an unnamed source. We argued that these constituted hearsay and were therefore inadmissible. As Gary had pointed out to the judge, there was a high risk that jurors would give undue weight to these audios, although in fact they contained no actual evidence against me, because compared to the vague and circumstantial nature of the rest of the evidence, these calls seemed more concrete.

  Rakoff, however, ruled that the tapes were exempt from the bar on hearsay evidence because they were in “furtherance of a conspiracy.” This seemed to me to be an absurd contortion of the law. It was a circular argument: the government wanted to use the tapes as evidence to prove the charge of conspiracy, but they were already assuming the conspiracy existed in order to allow the evidence! This just added to my sense that I was being judged guilty before I had been tried. But it appeared that even the most logical arguments would not persuade the judge.

  Day one of my trial dawned in fittingly somber fashion. At our New York apartment, where we’d be based for the next few weeks, I dressed in my best suit, the same one I’d have worn if preparing for an important consulting assignment. For a moment, the familiar ritual of choosing shirt and tie, belt and shoes lulled me into a sense of normalcy. But the look on Anita’s face as she handed me my tea snapped me back to reality.<
br />
  Robin arrived to pick me up promptly at 8 a.m., and we drove across to the east side to pick up Gary, before heading downtown to the courthouse. We didn’t say much, as the city streets crawled by. Even Gary’s jocular manner seemed muted. By the time we arrived, the heavens had opened. The downpour did not deter the press, however, who huddled beneath umbrellas as they surged around my car, thrusting microphones and cameras in my face. Using my own umbrella as a shield, I hurried into the courthouse, glad that Anita and the girls had traveled separately and were already seated inside, in the second row. As my lawyers guided me to our place in the front row, I noticed many other familiar faces. My old IIT friend Rajiv Johri caught my eye across the room and smiled his encouragement. I was touched to see Sonu’s husband, Meka, and Megha’s partner, George, among the packed crowd, along with many other family members and friends.

  Gary had told me that Rakoff had a reputation for being quick with the jury selection process, and this trial was no exception. By 2 p.m. it was decided. My fate would be in the hands of four men and eight women, including a nurse, a schoolteacher, a retired librarian, a youth advocate, and a beauty consultant. It would be up to these people to decide whether I was a scheming, greedy, envious man who traded corporate secrets for access to a billionaire’s circle, or an honest, trustworthy, but overstretched man who made a poor choice of business associate and was guilty of nothing more than bad timing. My greatest concern was how few among the twelve had experience or understanding of the worlds of business and finance. There was only one executive, from a nonprofit. Would they be able to follow the complex discussions of securities law, trading processes, business deals, and more?