After serving two years in prison on insider trading charges, Rajat Gupta maintains he is a man at peace. But the former McKinsey managing director’s calm quickly dissipates when the conversation turns to Goldman Sachs.
Mr Gupta was convicted of passing secrets he learnt in September 2008 as a Goldman director to hedge fund manager Raj Rajaratnam, who traded on the information about Warren Buffett’s rescue investment in the bank and its earnings.
Now 70 and the author of a new memoir — Mind without Fear — Mr Gupta remains angry at Goldman and its chief executive at the time, Lloyd Blankfein. Proclaiming his innocence, Mr Gupta portrays himself as a fall guy of the financial crisis, whose travails distracted attention from the Wall Street figures who caused the meltdown and the prosecutors who failed to bring them to justice.
“My speculation, and I have no way to prove it, is that [Goldman was] currying favour with regulators and the justice department,” Mr Gupta told the Financial Times in an interview timed to coincide with the release of his book on Monday.
In Mr Gupta’s telling, he wanted to leave the Goldman board in early September 2008, but stayed to help the bank weather the financial storm and wound up watching its chief executive, Mr Blankfein, testify against him in court.
“I cannot believe that a busy CEO like Lloyd would come and spend so much time testifying and so much time preparing with the prosecution,” Mr Gupta said. “There are so many examples of where what he should have said was ‘I don’t remember, I don’t know’. Instead, what he kept saying was, ‘Oh, it’s my practice to discuss earnings’.”
Goldman said in a statement that any accusations of quid pro quo between the bank and the Department of Justice were “absurd” and that “it is common knowledge that the board regularly receives updates on earnings”.
Another target of Mr Gupta’s ire is Preet Bharara, the US attorney in Manhattan who brought charges against him. In his book, Mr Gupta wonders whether Mr Bharara, a fellow Indian immigrant, held special contempt for him because of their shared heritage, noting that he was arrested on the Diwali holiday in 2010 and was sentenced in the Dussehra holiday in 2012.
“[Mr Bharara] couldn’t do what he was put in the job to do,” Mr Gupta said. “How can you have the perpetrators of the financial crisis, which is all the banks and the housing finance companies, and he couldn’t bring one person to justice?
“I can tell you that basically the incentives are misaligned. Most prosecutors have political ambitions. They want to win at any cost . . . if an innocent person is proven not guilty or the jury say not guilty, it’s a win for the prosecutor. They shouldn’t take it as a loss. What they did [was] to spin a story which they knew was wrong.”
When asked for comment, a spokesperson for Mr Bharara referred the FT to his recent memoir, Doing Justice. There Mr Bharara wrote that accusations about hostility towards a fellow Indian were “comical” and “absurd”. He also said finding intent of wrongdoing made pursuing Wall Street executives too difficult.
Mr Gupta has warmer sentiments towards Mr Rajaratnam, who was sentenced to 11 years in prison after being convicted of 14 counts of insider trading. In his book, Mr Gupta writes that he appreciated that his former business partner, who he says cheated him in a hedge fund venture, chose not to implicate him in any wrongdoing. By coincidence, the two encountered each other at the Massachusetts prison were both were housed — and even played cards once.
Mr Gupta was released from prison in 2016. But while behind bars the 37-year veteran of McKinsey, the blue-chip consultancy, used his time in prison to study the US criminal justice system, and is now working with groups such as The Marshall Project and Rise-N-Step to reform it.
“I interviewed about 40-odd prisoners and [reviewed] their cases in depth when I was in prison, and like a typical consultant I charted out what every stage of the criminal justice system is from policing to bail, to arrest,” he said. “There are many injustices, there are many biases and the system needs significant reform”.
Mr Gupta remains proud of his work in management consulting, seeing it as distinct from the wheeling-and-dealing of Wall Street. In his book, he recalls that McKinsey declined an assignment for GE that called for him to travel to apartheid-era South Africa because it would have been difficult for him as an Indian.
However, he acknowledged that McKinsey had erred in recent years — such as in its work for the scandal-ridden South African power company Eskom and for Saudi Arabia. “I think the South African thing was not good on McKinsey’s part no matter how you couch it,” he said. “I see nothing wrong in serving Saudi Arabia, per se, but if an assignment was for political purposes I would recommend we don’t serve that.”
Mr Gupta said he was open to working for authoritarian governments, arguing that if consultants turned down such work, “we wouldn’t serve half the countries in the world. I don’t think that’s the litmus test”. In this regard, he offered qualified admiration for China, calling the creation of the Chinese middle class “the biggest contribution for uplifting humanity in this century”.
“There is no question that 500m people were lifted out of poverty by a totalitarian regime unaccountable to its people,” he said. “I come from India, the largest democracy in the world and would I trade losing that democracy and would I trade going to China? No, I wouldn’t, but that doesn’t mean that hasn’t resulted in an extraordinary benefit to humanity. I’ve met a lot of the Chinese leaders and they are extremely smart because it’s an authoritarian system. The quality of the politicians [in India] is not that high in terms of just being able to fashion development programmes, in contrast to China.”
Mr Gupta sees the US as another democracy that could do with more adept political leadership. “I think we’ve lost our moral authority for some time,” he said. “We are a democracy and many of our friends are authoritarian regimes. We sometimes say we are for promoting democracy in authoritarian regimes we don’t like but we’re not promoting democracy in authoritarian regime we do like.”
While expressing gratitude for the opportunities the US has given him and his children — “it’s a fantastic country,” he said — Mr Gupta wondered whether his adopted home was growing less meritocratic, endangering its position as “the centre of innovation of the world”.
“My generation were clearly much more successful than our parents but it’s not so clear going forward it can be,” he said. “I am very much for a system where there are incentives for hard work and you’re rewarded. But I’m also very much for a safety net and a society valuing roles and contributions. We’ve gone completely askew when we pay teachers nothing and we pay some financial analyst 10 times as much.”
Mr Gupta was less worried about what other people think of him. During his years as a consultant, he became a role model for Indians and Indian-Americans alike, reaching the top of the global business establishment. His criminal conviction tainted his legacy, but he said he had learnt to live with the consequences.
“Sometimes I think it was my destiny to be going through this, and what does reputation matter?” he said. “I didn’t do any of the things I did — starting the Indian School of Business or public health institutes or any of it — to build a reputation. Let’s say I lost the reputation. So what?
“I learnt one big lesson from all of this which was a sense of detachment. It comes from the Bhagavad Gita. Don’t be attached to material things, don’t be attached to your reputation, don’t be attached to your success. Do the right things for the right reasons and then it doesn’t matter.”