The Rajat Gupta case is not about who he is,but about what he did or didnt
The US insider trading case against Rajat Gupta is off to a quick start and it looks like the poster boy of the Indian-American business community is in a difficult predicament. His counsel had highlighted his substantial work in philanthropy,anticipating that Gupta would be accused of the sin of greed. The judge read the riot act: Guptas defence could not use a Mother Teresa argument which drew attention to his alleged generosity. Secondly,the range of charges is narrower than the FBI wiretaps,which provoked the case,had suggested. Earlier,the tape with top billing was one in which Gupta revealed to his friend and hedge fund manager,Raj Rajaratnam,that Goldman Sachs might go shopping for a commercial bank,perhaps AIG or Wachovia Corp. But there was a time lag between the event and the leak and it is off the agenda.
The focus is now on a tape where,directly after a Goldman Sachs board meeting,Gupta had tipped off Rajaratnam that Warren Buffett would invest $5 billion in the firm. In 2008,when Wall Street was at its nadir,this was premium,actionable market intelligence. It had been claimed that this was public information by the time Gupta called Rajaratnam. But last Thursday,William George,who has served on the board of Goldman Sachs since 2002,testified that boardroom discussions constitute privileged information and even an inadvertent leak could be grounds for sacking.
The Rajat Gupta case needed to be narrowed down to a single issue: did he leak privileged market information? The case and its coverage had become absurdly wide-ranging,even suggesting that South Asians were being targeted. This trial is only one of several in the biggest-ever US investigation of insider trading. The trail happened to start with a South Asian executive,Roomy Khan,led to a network of ex-Wharton South Asians,including Rajaratnam,who was wiretapped,and that led to Gupta. The South Asians had used phones,unlike the old mafiosi of Wall Street,who have always traded leads at the 19th Hole. And theyve never been caught.