What can we learn from Rajat Gupta case?
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Rajat Gupta is a US citizen of Indian origin and an alumnus of IIT Delhi and Harvard Business School. He is a business executive who was the managing director (chief executive) of management consultancy McKinsey & Company from 1994 to 2003 and a business leader in India and the United States. He is also a founder of ISB Hyderabad. He was arrested in late 2011 by the FBI on insider trading charges stemming from the Raj Rajaratnam Galleon Group case and was convicted on four counts today and can possibly be sentenced to 25 years in an ordinary prison.
Till last year, Rajat Gupta was a role model for anyone who dreams of coming to USA for higher education and then living a perfect American dream. His early academic career is very inspirational, when despite the death of both his parents very early, he was able to continue his studies and made it to IIT Delhi. He was later admitted to Harvard Business School without any work experience, which was extremely rare in those days. Since he became the first person born outside USA to rise to the position of Managing Partner of McKinsey and Company, he has been one of the most prominent examples of Indians and IITians making it big in USA through sheer merit and hard work. In his capacity at McKinsey, Gupta was recognized as the first Indian-born CEO of a global corporation. Gupta has been a pillar of many PAN IIT activities and events in the USA.
He was convicted of insider trading. In simple words, he leaked confidential boardroom discussions of major companies on the board of which he served. In most examples cited by prosecutors, he would make a phone call to now convicted financial scammer Raj Rajaratnam tipping him of confidential information and within minutes Rajaratnam would buy or sell shares of that company. In a financial system of publicly listed companies, the very premise of confidentiality of board decisions is at the core of fairness. That is why there are very strict anti-insider trading laws in the US.
Now what we learn from this case: