Rajat Gupta: An American Dream Upturned

A glittering career of over 35 years whose inspirational story has been a fairy tale to many aspiring
management graduates and entrepreneurs across the globe, this case study revolves around the
corporate journey travelled by the Indian American businessman; Rajat Gupta

Introduction
Rajat Gupta is an Indian-American businessman and a former corporate head of McKinsey &
Company. He is considered to be the first Indian born CEO of a global corporation. He has also
served as a board director or strategic advisor to many notable companies such as Proctor &
Gamble, Goldman Sachs and American Airlines. He is the co-founder of the prestigious
management institution, the Indian School of Business along with long-time friend and business
associate Anil Kumar. Rajat Gupta in recent times has made headlines for his involvement in the
Raj Rajaratnam Galleon Group Case and was convicted on three counts of conspiracy and one
count of securities fraud in June 2012.

Early Life
Gupta's father passed away when he was just sixteen and unfortunately lost his mother too, two
years later. Now an orphan, Gupta and his three siblings decided to live by themselves which was
considered highly unusual and unexpected at that point of time. However, the unfortunate demise
of his parents early in his life did not seem to deter either his ambitions or his academic career. He
received a Bachelor of Technology degree in Mechanical Engineering from the Indian Institute of
Technology, Delhi in 1971. Declining a job from the prestigious Indian firm ITC Limited, he went
on to receive a Master of Business Administration from Harvard Business School (HBS) in 1973,
where he was named a Baker Scholar for his meritorious academic performance.

Career
Gupta joined McKinsey & Company a top-tier, consulting firm in 1973 as one of the earliest Indian-
Americans at the firm. He was elected senior partner in 1984 and was elected as the firm's first
managing director (chief executive) born outside the US in the year 1994. Further, he was re-elected
twice in 1997 and 2000.

Gupta believed in aggressive firm expansion, the firm opened offices in 23 new countries and
doubled its consultant base. However, this was seen as a policy quite different to the “McKinsey
Heritage”, a point his successor Ian Davis stressed upon to get elected as his successor. Since he
became corporate head, it was perceived that the company had been changing standards and was
received with mixed reactions from various people across the globe.
Gupta is considered to have violated professional values and standards by providing consulting or
advisory services outside of McKinsey for personal monetary gain. He also setup the New Silk
Route while he was the senior partner of McKinsey, a fact quite widely criticized. Gupta maintained
an office, executive assistant, email and phone at McKinsey and Company after 2007, and retained
the title senior partner emeritus of the firm. He served on the corporate board of directors of
Goldman Sachs, Procter & Gamble, American Airlines parent AMR, Harman International, and
Sberbank. He was also senior advisor to KKR
(formerly Kohlberg, Kravis, Roberts & Co.), the chairman of Galleon International, and advisor to
other financial institutions such as the Qatar Financial Centre. Throughout his career, Gupta has
been a part of various global business initiatives. He was previously the chairman of the
International Chamber of Commerce, and was appointed as Special Assistant to the Secretary
General for Management Reform for UN Secretary General Kofi Anan in 2005. Mr. Gupta worked
with former President Bill Clinton in leadership roles at the American India Foundation and as
chairman of the Global Fund for HIV/AIDS. Rajat Gupta was entrusted by some of the premier
institutions of American business to sit inside their boardrooms, among their executives and
directors, and receive their confidential information so that he could give advice and counsel.

Insider trading and Conviction

On April 15, 2010, the Wall Street Journal reported that federal prosecutors in the US were
investigating Gupta's involvement in providing insider information to Galleon hedge-fund founder
Raj Rajaratnam, in particular the $5 billion Berkshire Hathaway investment in Goldman Sachs at the
height of the financial crisis in September 2008. On 1 March 2011, the SEC filed an administrative
civil complaint against Gupta for insider trading with billionaire and Galleon Group founder Raj
Rajaratnam. During the court case, which finally held Gupta guilty, the secret recordings of
conversations between Gupta and Rajaratnam were also heard by the jury in the month of June. The
trial focused on Gupta’s phone call to Rajaratnam on 23 September 2008, immediately after
attending a private conference and learning about the investment of $5bn (£3.2bn) by Warren
Buffett's company Berkshire Hathaway in Goldman Sachs. The deal was officially supposed to be
made public after stock markets closed that day. Phone records showed that Rajaratnam bought
$40m in Goldman Sachs stock moments after the phone call, earning nearly $1m. The instructions
to the jury from Judge Rakoff noted that the definition of insider trading requires only knowing
participation in a scheme for an anticipated benefit, not direct trading. On June 16, 2012 Rajat
Gupta was found guilty on three counts of securities fraud and one count of conspiracy. He is one
of the most prominent business executives convicted in a wave of prosecutions that followed the
government's sweeping investigations into insider trading on Wall Street.

The Reaction
With the court proceeding coinciding with the “occupy wall street” protests there was a general
feeling of resentment and anger amongst the citizens of USA, towards the super-rich corporations
and entrepreneurs. The anger and concern of the citizens were witnessed in many letters to Judge
Rakoff, few months before Mr. Gupta’s sentence was to be given Judge Rakoff received letters of
support for Mr. Gupta from hundreds of prominent supporters, including Microsoft Corporation
co-founder Bill Gates, the well-known author Deepak Chopra, and former U.N. leader Kofi Annan.
Their contentions that Mr. Gupta deserved leniency because he had lived an otherwise exemplary
life and given many years to health-care, poverty, education
and other philanthropic causes, were set against the legal requirement that a judge issue a sentence
that will discourage others from similar crimes The indictment of Rajat Gupta for insider trading by
a 12-member jury has not only shocked his family but, the entire three-million strong Indian-
American community and hundreds of his admirer’s world over. His punishment marked a tragic
corporate demise of one of the most
inspirational corporate moguls in recent times much to the grief of many young aspiring
entrepreneurs across the globe who have looked up to him in awe for truly living the ‘almost perfect
American dream’. Rajat Gupta’s career shows values that are rare and praiseworthy. What made him
cross to the wrong side of law is something which has left many bewildered, as he seemed to be
doing great on the right side of it. But the message he gives to future entrepreneurs seems very clear
‘It is a requirement to be greedy, but not in excess’.