Goldman Sachs is a New York-based investment banking firm that engages in global investment banking, securities, investment management, and other financial services, primarily with institutional clients. Founded in 1869, the firm is recognised as one of the most prestigious institutions in the world, although its reputation has suffered after the financial sector drew fire since the global financial crisis.
Rajat Gupta: Wall Street's good man who gave too much
Wall Street star Rajat Gupta built a reputation for his good works but a free tip to a friend was his undoing and earned him a jail sentence
Rajat Gupta, the former Goldman Sachs Group director and McKinsey & Co managing director, was once a star on Wall Street known for his charity work.
Now he is getting ready to go to prison for two years.
Gupta, who ran McKinsey from 1994 to 2003, was sentenced on Wednesday by US District Judge Jed Rakoff in Manhattan for leaking stock tips to Galleon Group co-founder Raj Rajaratnam. Gupta, 63, was convicted by a jury in June of one count of conspiracy and three counts of securities fraud.
While Gupta did not personally profit, his tips allowed Rajaratnam to earn millions of dollars, said assistant US attorney Richard Tarlowe.
"The crime is so serious because of the position that was held, and that is why the fall from grace is more steep," Tarlowe said. "It is very important that the message be clear to that community, to that target audience, that this is insider trading.
"If you are a senior executive, if you tip another professional, another prominent businessperson, a hedge fund manager, even if you do it using your regular phone from your executive suite, that is insider trading and that will be punished severely."
Gupta asked for probation and community service. His lawyer, Gary Naftalis, had proposed that he work with needy children in New York or the poor in Rwanda. Citing Gupta's good works and saying he'd suffered enough with his reputation destroyed, Naftalis argued that his client should be granted leniency.
"The fall from grace that Mr Gupta has suffered or experienced as a result of this matter is as steep as I have ever seen anyone in any case that I have ever seen," Naftalis said. "This was an iconic figure, someone who had been a role model for people around the globe for his work."
Gupta served on the boards of Procter & Gamble and AMR and won praise for his charity from Microsoft chairman Bill Gates and former United Nations secretary general Kofi Annan. As McKinsey's youngest managing director, he almost tripled the firm's revenue.
Gupta's life "has been an extraordinary one", Naftalis said yesterday in court. The lawyer said his client has made "extraordinary contributions that have tangibly helped many, many people on this planet".
His crimes are a "total aberration in an otherwise laudatory life", Naftalis said. "This is a man who has suffered punishment enough."
Rakoff said he agreed with the description of Gupta's good works. "I think the record, which the government really doesn't dispute, is that he's a good man, but the history of this country and the history of the world are filled with good men who do bad things, so I don't think that's the end of the subject," Rakoff said.
Rakoff called Naftalis's suggestion about community service in Rwanda "very innovative", adding that he believed some period of incarceration was necessary.
"I thought, ah, this was the Peace Corps for insider traders," the judge told Naftalis. "But I think if everything you told me about Mr Gupta's character is correct, and I think it is, he would be doing this regardless of a court order or not. So looking at it in a cynical kind of way, it is not punishment."
Rakoff, who has long criticised the federal sentencing guidelines, which are advisory, said he needed to consider the totality of Gupta's crimes in fashioning a sentence.
"The court can say without exaggeration that it has never encountered a defendant whose prior history suggests such an extraordinary devotion, not only to humanity writ large, but also to individual human beings in their time of need," Rakoff said.
"But when one looks at the nature and circumstances of the offence, the picture darkens considerably. 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 … 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.