Gupta defied McKinsey before SEC action
On a sunny afternoon in June 2003, Rajat Gupta was greeted at his waterfront home in Westport, Conn., by scores of his McKinsey & Co. partners. They had come from London, Frankfurt, New Delhi and other cities around the world – and brought along an elephant, which they tethered on the front lawn.
Gupta was stepping down after nine years as managing director of the global consulting firm, and his colleagues were gathered to celebrate his tenure and wish him the best.
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They offered champagne toasts and took photos of Gupta standing next to the elephant, which was draped in a brightly colored shawl called a jhool – representing the Hindu god Ganesh, who bestows good fortune on new ventures.
Today, some of those same people say they’re stunned by what they have since learned about Gupta. In March, the SEC filed an administrative order against him saying that he had passed confidential information to hedge fund billionaire Raj Rajaratnam, the central figure in the biggest crackdown on insider trading in U. S. history.
Rajaratnam was convicted on 14 counts of conspiracy and securities fraud and could face 19 years in prison, pending his sentencing in federal court.
Government wiretaps and phone records show that Gupta called Rajaratnam nine times in 2008 and 2009, giving the hedge fund manager
information to make trades for his Galleon Group.
Gupta, 62, who divides his time between Connecticut, Manhattan and Florida, has lived a double life. For 34 years until 2007, he worked for McKinsey, one of the world’s most trusted and prestigious consulting firms.
As a philanthropist, Gupta raised millions of dollars for education and health care, especially in India, where he was born and to which he wanted to give back. He has done charitable work with Microsoft co-founder Bill Gates and Bill Clinton. Friends describe him as brilliant and humble.
Keeping secrets
At McKinsey, a firm known for keeping secrets, Gupta harbored a few of his own. As the managing director and then as senior partner of McKinsey for four more years before he retired, he ran his own consulting business on the side – a violation of McKinsey rules.
He and Anil Kumar, a former McKinsey partner who last year pleaded guilty to passing confidential information to Rajaratnam, set up their own firm. Gupta also independently advised Genpact, a Gurgaon, India-based firm that manages business processes for other companies. That work, too, broke McKinsey’s rules.
“It has always been a clear violation of our values and professional standards for any firm member to provide consulting or advisory services outside of McKinsey for personal monetary gain,” says Michael Stewart, a McKinsey partner and director of communications.
McKinsey conducted an investigation of Gupta and Kumar and has cooperated with prosecutors and the SEC.
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