Short clip. Former U.S. prosecutor Douglas Burns discusses Raj Gupta's sentence.
Rajat Gupta, the former Goldman Sachs director and McKinsey & Co. managing director who rose to the pinnacle of Wall Street, was sentenced to two years in prison for passing inside tips to his business partner.
Gupta, who ran McKinsey from 1994 to 2003, was sentenced today by U.S. District Judge Jed Rakoff in Manhattan for leaking stock tips to Galleon Group LLC co-founder Raj Rajaratnam. Rakoff ordered Gupta to report to prison on Jan. 8 and fined him $5 million, rejecting a bid to allow him to remain free pending appeal.
Prosecutors had sought a prison term for Gupta of as long as 10 years in prison. Assistant U.S. Attorney Richard Tarlowe today argued that Gupta’s crimes warranted a substantial prison time because of his prominence in the business world and the egregiousness of his crimes. Tarlowe said a sentence of probation would give the impression that there is “a two-tier system of justice.”
While Gupta didn’t personally profit, his tips allowed Rajaratnam to earn millions of dollars.
Rakoff, who has long criticized the federal sentencing guidelines, which are advisory, said he needed to consider the totality of Gupta’s crimes in fashioning a sentence.
“In the court’s view, the evidence established, to a virtual certainty, that Mr. Gupta, well knowing his fiduciary duties, brazenly disclosed material nonpublic information to Mr. Rajaratnam at the very time, September and October 2008, when our financial institutions were in immense distress.”
Before he was sentenced, Gupta briefly addressed the court.
“I lost my reputation that I built over a lifetime,” he said. “The last 18 months have been the most challenging period of my life since my parents died when I was a teenager.”
While Gupta didn’t take responsibility for his conviction, he apologized to his family, friends and McKinsey & Co., as well as the institutions he helped create, such as the Indian School of Business, the Public Health Foundation of India and the America India Foundation.
“Your Honor, as I come before you to be sentenced, the overwhelming feelings in my heart are of acceptance of what has happened, of gratitude to my family and friends, and of seeking forgiveness from them as well,” Gupta said. “It is with these feelings that I hope to move forward and dedicate myself to the service of others.”
Since August 2009, prosecutors in the office of Manhattan U.S. Attorney Preet Bharara have charged at least 72 people with insider trading. The Galleon case was part of a federal initiative by Bharara’s office and the Federal Bureau of Investigation in New York, called “Perfect Hedge,” that used techniques such as informants and wiretaps, commonly used to combat drug dealers and organized crime figures, against white- collar defendants.
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Gupta interview - July, 2011.
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