New York: Fallen Wall Street insider Rajat Gupta was sentenced to two years in prison on Wednesday for leaking Goldman Sachs boardroom secrets to the hedge fund manager at the centre of the US government’s crackdown on insider trading, a much lighter sentence than prosecutors had sought.
The sentence was imposed by US District Judge Jed Rakoff, who wrestled over the course of a two-hour hearing with the question of why Gupta, a once-respected businessman, had turned his back on an “extraordinary” and “selfless” life to commit a crime he did not profit from directly.
“I have never encountered a defendant whose past history suggests such an extraordinary devotion … to people in need,” Rakoff said. Yet, Gupta’s past good deeds “starkly contrast with the nature and circumstances of his crimes.”
During the hearing, Judge Rakoff said of Gupta: “I think the record, which the government really doesn’t dispute, bears out that he is a good man.”
“But the history of this country and the history of the world, I’m afraid, is full of examples of good men who do bad things,” added the judge.
Gupta, 63, had no visible reaction to the sentence. He was also ordered to pay a $5 million fine.
The former Goldman director is the most influential corporate figure to be convicted in the wide US probe of insider trading involving fund managers, traders, consultants and executives. He is a former global head of the McKinsey & Co management consultancy, and also once sat on the boards of Procter & Gamble Co and American Airlines as well advising philanthropies including the Bill and Melinda Gates Foundation.
A Manhattan federal jury found him guilty in June of feeding tips about Goldman Sachs at the height of the 2008 financial crisis to hedge fund tycoon Raj Rajaratnam, his friend and business associate. Rajaratnam is now serving an 11-year prison term for insider trading.
Gupta’s sentence was less than the eight to ten years sought by prosecutors, but more than the punishment of probation and community service that Gupta’s lawyers had requested.
Fall from grace
“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,” Gupta’s lawyer, Gary Naftalis, told the court. “This was an iconic figure who had been a role model for countless people around the globe. He is no more.”
As one alternative to prison, the defense had proposed “a less orthodox” plan in which Gupta would go to Rwanda to help fight HIV/AIDS and malaria in rural districts as well as work with a New York group focused on at-risk youth.
Bill Gates, Microsoft Corp’s co-founder, and former United Nations Secretary-General Kofi Annan were among 400 friends and luminaries who had written letters to the judge urging leniency.
Federal judges have wide leeway in sentencing, and Rakoff has a reputation for veering from guidelines designed for courts in handing down punishment. Gupta had faced a maximum sentence of 20 years for securities fraud and five years for conspiracy.