It’s a story that has all the elements of a cinematic thriller - set in New York, the biggest insider trading case in recent times involving the Indian-American lion of the corporate world, former McKinsey chief and Goldman Sachs board member, Rajat Gupta, and the ‘Tamil Tiger of Wall Street’, Raj Rajaratnam, billionaire and founder of the Galleon hedge fund.
This is the backdrop of Anita Raghavan’s book, The Billionaire’s Apprentice which puts the spotlight on Gupta as he went from being a revered icon to convicted felon. As part of her research for the book, Raghavan, a Wall Street reporter, attended the landmark trials of Gupta and Rajaratnam, interviewed several key sources in the US, UK and India, and used the wire-taps in the trial to recreate the drama. Here, she speaks about why this story is so personal, the possible reasons for Gupta’s downfall and why reactions to the case were vastly different in the US and in India.
In what way does Rajat Gupta’s story reflect upon the Indian diaspora in the US?
The story of Rajat Gupta and his family was the story of many Indians, if not all Indians. It was certainly the story of my parents -- my father, like Gupta, came to the US on a student F-1 visa. Some people have quibbled with the title -- The Rise of the Indian-American Elite because they ask why I did not look at some of the community’s most shining figures. Well, Gupta was one of the most shining figures there. What happened to him does not negate his journey before. I had long wanted to write about the South Asian diaspora in the US in an engaging way. The Rajat Gupta and Galleon cases was the perfect vehicle.
In The Billionaire’s Apprentice, you mention that Gupta was part of the fortunate ‘twice-blessed’ generation -- can you explain that?
The term ‘twice-blessed’ generation is coined by academician Vijay Prashad. It refers to the generation of Indians who were born after Independence and who benefitted from two of the greatest social movements in the 20th century.
Independence offered young Indians political freedom and many opportunities -- the growth of the IITs, for instance, allowed students to compete globally.
The second blessing was that the Indians who came to the US benefitted from the American civil rights struggle after which the Hart-Cellar Act was passed in 1965. This act opened the floodgates to Asian immigration to the US. Before that, only 100 Indians were allowed each year into the country. In 1965, with the Act, immigration quotas for Indians were raised significantly. As Indian immigrants entered into the workforce in the late ‘70s and early ‘80s, some of the effects of the civil rights struggle were starting to percolate in American corporations and more doors opened to them.
Rajat Gupta and Raj Rajaratnam seem like opposites -- what drew them together?
In some ways, it’s almost Shakespearean. Gupta was the dignified corporate strategist Othello. He was played by Rajaratnam, the crude, bawdy, hustling hedge fund trader who could well be Iago. They were contrasting personalities. Gupta was the venerable statesman; he kept company with the global elite -- heads of state, philanthropists and corporate chieftains. Rajaratnam probably would not have been even invited into that company. He was a street-fighter, a brash Wall Street trader who liked to be bawdy and colourful. What brought them together was Gupta’s desire to reinvent himself after a tumultuous time at McKinsey. He saw Rajaratnam as the way to reach greater heights.
One wonders why would someone like Gupta, who had it all wealth, power and privilege -- risk losing it all by violating corporate ethics?
I was a result of several events. I think what happened was, that as Gupta was leaving the top job at McKinsey, he felt a loss of power. And that is when Rajaratnam made himself available. Rajaratnam could be very charming. With Roomy Khan, he made himself available by offering her employment; with Rajiv Goel, he became a friend that Goel could turn to for career advice; and he boosted Anil Kumar’s ego. He had sensed that Gupta was not over yet. Gupta wanted wanted to make a name for himself in the sphere of investing.
Also, another factor that played in was that Gupta had come to New York fairly late in his career (he was based in Scandinavia and Chicago earlier). The sense of power when you are in the heart of New York City’s corporate world is enormous. Gupta was stepping down from a powerful position in New York, at a time when power and wealth meant most to him.
In his conversations, Rajaratnam refers to the ‘camps’ within Wall Street. Did you also notice that while reporting from New York?
Absolutely. In the 1970s, when Gupta would have started on in McKinsey, there were some firms such as Morgan Stanley that were white-shoe Protestant firms, and firms like Goldman Sachs which were largely perceived as being Jewish firm, so yes, that certainly was in the history of Wall Street. It was only in the 1980s that it started breaking down -- when there was a great migration of Indian immigrants who changed Wall Street.
In what way has this case impacted the Indian-American community?
The risk is, events like these may be used by prejudicial Americans to discriminate against Indians. But the Indian-American community in India can get beyond this and emerge stronger. When my parents came to America, I don’t think we would have had a case like this because we were not important enough to matter -- we weren’t in those boardrooms.
Did you see very different reactions from India and the US, in how they reacted to the Gupta conviction?
Yes. Insider trading was only fairly recently considered illegal in India - so there may a perception that it’s not a big crime. In the US, most people in the corporate world know that when you sit on a corporate board, you are supposed to keep the contents of those board meetings confidential. While there was no wire tap to show that Gupta had called up Rajaratnam to tell him about the Warren Buffett investment in Goldman Sachs, what we did have was one wire tap showing a free and easy exchange of information between Gupta, a respected board member, and Rajaratnam, a short-term trader whose living depended on capitalising on minute-by-minute moves in the market.
There are also some Indian-Americans who think that Rajat Gupta was treated unfairly. In both India and US, Gupta was an icon. But loyal as they were to Gupta, many Indian-Americans found it hard to condone his discussion with Rajaratnam because they knew how the US corporate environment is.
Will the case deter insider trading on Wall Street?
Yes I think it will. I can still recall the day when Rajaratnam and Anil Kumar were arrested. Trading floors and corporate houses have news and business channels on big screens on 24 hours -- and to see the towering figures of the community being paraded in handcuffs over and over again -- I think that has a very sobering, chilling effect on people who are watching it.
Was this story particularly difficult to report?
People were very reluctant to talk because this was a story that they didn’t want to tell -- because it would not only have a negative impact on the people involved, but would cast a pall over the whole Indian-American community