Wall Streets biggest scandal,the Galleon Group insider trading case,in recent times is creating ripples in the US as well as India. Though the central figure in the insider trading scandal involving the group,a large hedge fund based in the US,is its founder,Sri Lanka-born Raj Rajaratnam who was arrested by the FBI on October 16,2009,the case has ensnared several India-born professionals,too,like former McKinsey chief Rajat Gupta,Intel Capitals Rajiv Goel and McKinsey director Anil Kumar. Man at the centre Raj Rajaratnam and 25 others have been charged in a sweeping insider-trading case that has allegedly led to $45-85 million in illicit profits. Rajaratnam and others including Gupta,Goel and Kumar- were accused of conspiring with others to trade based on insider information involving 35 companies,mostly the whos who of technology companies including Intel Corp,Google Inc,Advanced Micro Devices Inc,Clearwire Corp and Akamai Technologies Inc. With the alleged inside help from these people and others,Rajaratnam built a hedge fund that managed $7-8 billion at its peak in 2008. The US Securities and Exchange Commission has said success was achieved more by guile than by genius. Forbes magazine had described Sri Lanka-born Rajaratnam as the 236th richest American in 2009 with an estimated net worth of $1.8 billion. He was the richest Sri Lankan-born person in the world till 2009. The others Rajaratnam allegedly profited from information they got from Robert Moffat,an IBM senior vice president who allegedly provided data about a possible IBM merger with Sun Microsystems that led to a $1 million windfall for Rajaratnams New Castle Funds. Rajaratnam has also been accused of conspiring with Intel Capital treasury department managing director Rajiv Goel,and Anil Kumar,a director of McKinsey & Co. The alleged offences took place over three years starting in January 2006. Rajaratnam,Goel and Kumar were all of class of 1983 from Wharton business school. Crackdown Rajaratnam,53,was arrested in October 2009. The US agencies charged more than two dozen former hedge fund managers,traders and executives in a probe dating back at least three years. The investigation has been expanded in recent months to include charges against researchers who provide hedge funds with company information. Rajaratnam and five other investors allegedly secured inside information regarding firms including Google,Advanced Micro Devices,and Hilton Hotels. The US Securities and Exchange Commission said it has filed an insider trading complaint against Rajat K Gupta for tipping Rajaratnam with inside information about the earnings at Goldman Sachs and Procter & Gamble as well as an impending $5 billion investment by Berkshire Hathaway in Goldman. Rajaratnam used the information to trade on behalf of some of Galleon's hedge funds,or shared the information with others at his firm who then traded on it,the commission said. The Fallout Pressure is now mounting. Former Galleon Group portfolio managers have already pleaded guilty to trading ahead of corporate takeovers based on inside information and agreed to co-operate with the government in its case against Rajaratnam. Galleons former portfolio manager Adam Smith pleaded guilty to securities fraud and conspiracy to commit securities fraud in a federal court in New York on Wednesday. Prosecutors alleged his trades resulted in $1.3 million in profits. Former trader Michael Cardillo also pleaded guilty to having received and traded on inside information in stocks such as JM Smucker and Procter & Gamble. Not just Wall Street but the Indian corporate world is watching the unfolding drama in the US courts. First India-born global CEO When Rajat Kumar Gupta became the managing director (worldwide) of global consulting and management firm McKinsey in 1994,it made him the first India-born professional to gatecrash into the privileged club of CEOs in the United States. After joining the firms New York office in 1973,Kolkata-born Gupta never looked back while climbing the corporate ladder and steered McKinsey till 2003. Gupta now faces allegations of giving the Galleon Group founder insider information on two companies. Gupta,63,had his initial education in India. His studied at Modern School,New Delhi,and later got his Bachelor of Technology degree in mechanical engineering from IIT-Delhi. Later,he went to the US for an MBA from Harvard Business School. In his 34-year career in consulting,Gupta served many leading companies on a broad set of topics related to strategy,organisation and operations. He has played a thought leadership role in organisational thinking throughout his career,and led the organisation practice for McKinsey. After leaving the firm,he became a founding partner and the chairman of New Silk Route Partners,a leading Asia-focused growth capital firm founded in 2006 with $1.4 billion under management,focused on the Indian subcontinent,as well as other rapidly growing economies in Asia. Gupta,who is the chairman of Pan IIT Alumni Board,is very active in many non-profit institutions focused on education,health and development. He took a pivotal role in setting up the Indian School of Business in Hyderabad and continues as the chairman of the executive board and the governing board of ISB. India Inc veterans give much of the credit for the success of ISB to Gupta. Gupta served on the board of many multinational companies like American Airlines Inc,Genpact Limited,Procter & Gamble and Sberbank. Tapping Guptas expertise,UN Secretary-General Kofi Annan appointed him special adviser on management reform. US investment firm Goldman Sachs brought him as an independent director in November 2006 and he continued on its board till March 2010. He left the boards of Goldman Sachs and Procter & Gamble as the insider-trading case surfaced by that time. The US media reported in April 2010 that federal prosecutors were investigating Guptas involvement in providing inside information to Galleon hedge fund founder Raj Rajaratnam during the financial crisis,specifically about the $5 billion Berkshire Hathaway investment in Goldman Sachs at the height of the financial crisis in 2008. This week,the Securities and Exchanges Commission (SEC) of the United States filed a complaint against Gupta for tipping Rajaratnam with insider information about the earnings at Goldman Sachs Group and Procter & Gamble. The SECs division of enforcement said Gupta had learned this confidential information during board calls and in other aspects of his duties on the boards of the two multinationals. Gupta has already denied the charges. Gupta currently lives in Connecticut,United States,with his wife and four daughters.
