Ex-Goldman Director Gupta’s Last Days of Freedom
By ANITA RAGHAVAN
June 13, 2014 10:02 am
On Tuesday, Rajat K. Gupta, the former managing director of the consulting firm McKinsey & Company who was convicted of insider trading, is scheduled to report to a minimum-security prison camp in Massachusetts, spending the next two years not far from his one-time friend and partner in crime, Raj Rajaratnam.
A federal judge, at the request of Mr. Gupta’s lawyer, had recommended that Mr. Gupta be sent to a prison in Otisville, N.Y., but Mr. Gupta has been assigned to the satellite camp at FMC Devens in Ayer, Mass., 40 miles northwest of Boston.
In an interesting twist, Mr. Rajaratnam, the man to whom Mr. Gupta was convicted of giving corporate secrets on a raft of companies, including Goldman Sachs, is in FMC Devens’ federal medical center. Mr. Rajaratnam, the founder of New York hedge fund Galleon Group, is a diabetic and FMC Devens’ medical unit provides dialysis. His facility is next to the satellite camp where Mr. Gupta will be.
One of the differences between the two prisons is that Mr. Rajaratnam has slightly longer visiting hours. On Fridays, he can mix with friends and family from 8:30 a.m. to 3 pm; Mr. Gupta can receive guests only from 2:30 p.m. to 8:30 p.m.
Mr. Gupta’s effort to put off his two-year sentence ended this week when the Supreme Court rejected a request for a delay.
Since a federal jury in Manhattan found him guilty two years ago, Mr. Gupta has been putting his financial house in order, part of which involves paying regular visits to his villa in the Palm Island Resort in southwest Florida.
The villa, where Mr. Gupta would feast on tandoori chicken and play Scrabble with family and friends at holidays, has long been his home away from home. Now, it is also his legal residence — a fact that was confirmed in a lawsuit Mr. Gupta filed in March 2013 against his former business partner Parag Saxena.
For Mr. Gupta, his place of abode is not an academic question; it may be crucial to his financial future.
In the event that his legal appeals are exhausted and he is forced as a result to pay the legal costs for his defense, he will be able to shield his home, regardless of its value, in any bankruptcy court proceeding if he is domiciled in Florida, rather than in Connecticut, which had been his legal residence.
Mr. Gupta owns a waterfront property in Westport, Conn. that once belonged to James Cash Penney Jr., a co-founder of the retailing empire J.C. Penney.
Mr. Gupta bought the sprawling house for $6.125 million in the late 1990s and poured hundreds of thousands of dollars into renovating it. If he seeks bankruptcy-court protection in Connecticut, he would be able to shield only $75,000 of the property’s value from creditors. Mr. Gupta also owns a house in Colorado, a state that, like Connecticut, has a similar limit on the assets protected in the event of bankruptcy.
He wouldn’t be the first white-collar felon to seek to escape the clutches of creditors or litigants. In the early 1990s, Martin Siegel, a former Wall Street investment banker convicted of insider trading, also moved from Westport, Conn. to a $3.25 million, 7,000-square foot beachfront home in an upscale Jacksonville, Fla. suburb, protecting his assets from a $2.75 billion civil suit.
So far, Goldman, Sachs, on whose board Mr. Gupta sat, has been footing the bills because the bank’s bylaws require it to pay the legal fees of its top officers and directors. Goldman is required to pay until Mr. Gupta has exhausted all avenues of appeal. Shortly after he was convicted of insider trading charges in 2012, Mr. Gupta hired noted appellate lawyer and a former United States solicitor general, Seth P. Waxman, to handle his appeal.
But Mr. Waxman has had little success pressing Mr. Gupta’s case. In March, a three-judge panel of the United States Court of Appeals for the Second Circuit upheld Mr. Gupta’s conviction. The court is considering his request to rehear his appeal.
Besides arguing that the wiretap recordings that helped convict Mr. Gupta were improper, a major element of his appeal will be that the lower courts erred on the question of whether a defendant is entitled to a jury instruction that ”character testimony may in and of itself raise a reasonable doubt.”
Mr. Gupta’s lawyers have argued that the lower courts decision on this point contravenes the Supreme Court’s position.
His fight to overturn his conviction has not been cheap. His total legal costs — including fees paid to his trial lawyers at Kramer Levin Naftalis & Frankel and to consultants and experts — stands at roughly $40 million.
In a deal hashed out with Goldman, Gupta agreed before his trial that he would reimburse the bank for his legal bills if he was found guilty of insider trading and his conviction was upheld. Last February, a federal judge ordered Mr. Gupta to pay Goldman more than $6.2 million for the legal expenses that the investment bank incurred in connection with his insider trading case, meaning that once all his appeals are exhausted Mr. Gupta is likely to owe Goldman about $50 million.
At one time, it appeared that the former McKinsey chief had ample assets. During his trial, a JPMorgan Chase private banker testified that Mr. Gupta had a net worth of more than $130 million in the spring of 2008 . But, like many, Mr. Gupta lost money during the financial crisis and several of his income streams—board of director fees, for instance, and payouts from McKinsey—have dried up since his legal troubles have come to light.
In recent weeks, anticipating that he will be away from his family for two years when he surrenders on June 17 to begin his prison sentence, Mr. Gupta has been spending time with each of his four daughters, taking short breaks with them. He recently returned from a trip with one to the Grand Canyon, a friend says.
During his years at the helm of McKinsey, Mr. Gupta was among Manhattan’s power elite, often seen lunching at hotspots such as the Four Seasons Grill Room. But since his conviction in 2012, Mr. Gupta rarely ventures to New York; he hasn’t been seen at the Grill Room for years, and a sighting of him in December at upscale San Pietro had diners buzzing. Nowadays, a more common sight is Mr. Gupta walking along the brook of his Westport, Conn., house with his dog in tow.
In one of his rare public appearances last year, he ventured to Washington to attend a strategy session convened by alumni for the Indian Institutes of Technology. Mr. Gupta and his wife, Anita, attended I.I.T. Delhi and, at the meeting, he told the group that he planned to go down fighting because he passionately believed in his innocence.
He already is contemplating a future after prison. In the past year, he has been working on a book, telling his side of the story, say friends, and even though his star has faded in the United States, he is still popular in India. Before his trial, some of India’s biggest industrialists, like Mukesh Ambani, wrote letters of support and, once he is released, he has told friends that the first place he wants to visit is his homeland, India. A federal court judge rejected his request this year to travel to India for a nephew’s wedding.
Like his former colleague, Anil Kumar, who pleaded guilty to giving corporate secrets to Mr. Rajaratnam and now spends most of his time in India, Mr. Gupta will have no trouble lining up consulting assignments from Indian companies. But his sterling calling card—offering Indian executives unparalleled access to American chief executives and politicians—will be badly tarnished.
Anita Raghavan is the author of “The Billionaire’s Apprentice: The Rise of the Indian-American Elite and the Fall of the Galleon Hedge Fund,” published by Business Plus.
http://dealbook.nytimes.com/2014/06/13/ex-gol...f-freedom/
By ANITA RAGHAVAN
June 13, 2014 10:02 am
On Tuesday, Rajat K. Gupta, the former managing director of the consulting firm McKinsey & Company who was convicted of insider trading, is scheduled to report to a minimum-security prison camp in Massachusetts, spending the next two years not far from his one-time friend and partner in crime, Raj Rajaratnam.
A federal judge, at the request of Mr. Gupta’s lawyer, had recommended that Mr. Gupta be sent to a prison in Otisville, N.Y., but Mr. Gupta has been assigned to the satellite camp at FMC Devens in Ayer, Mass., 40 miles northwest of Boston.
In an interesting twist, Mr. Rajaratnam, the man to whom Mr. Gupta was convicted of giving corporate secrets on a raft of companies, including Goldman Sachs, is in FMC Devens’ federal medical center. Mr. Rajaratnam, the founder of New York hedge fund Galleon Group, is a diabetic and FMC Devens’ medical unit provides dialysis. His facility is next to the satellite camp where Mr. Gupta will be.
One of the differences between the two prisons is that Mr. Rajaratnam has slightly longer visiting hours. On Fridays, he can mix with friends and family from 8:30 a.m. to 3 pm; Mr. Gupta can receive guests only from 2:30 p.m. to 8:30 p.m.
Mr. Gupta’s effort to put off his two-year sentence ended this week when the Supreme Court rejected a request for a delay.
Since a federal jury in Manhattan found him guilty two years ago, Mr. Gupta has been putting his financial house in order, part of which involves paying regular visits to his villa in the Palm Island Resort in southwest Florida.
The villa, where Mr. Gupta would feast on tandoori chicken and play Scrabble with family and friends at holidays, has long been his home away from home. Now, it is also his legal residence — a fact that was confirmed in a lawsuit Mr. Gupta filed in March 2013 against his former business partner Parag Saxena.
For Mr. Gupta, his place of abode is not an academic question; it may be crucial to his financial future.
In the event that his legal appeals are exhausted and he is forced as a result to pay the legal costs for his defense, he will be able to shield his home, regardless of its value, in any bankruptcy court proceeding if he is domiciled in Florida, rather than in Connecticut, which had been his legal residence.
Mr. Gupta owns a waterfront property in Westport, Conn. that once belonged to James Cash Penney Jr., a co-founder of the retailing empire J.C. Penney.
Mr. Gupta bought the sprawling house for $6.125 million in the late 1990s and poured hundreds of thousands of dollars into renovating it. If he seeks bankruptcy-court protection in Connecticut, he would be able to shield only $75,000 of the property’s value from creditors. Mr. Gupta also owns a house in Colorado, a state that, like Connecticut, has a similar limit on the assets protected in the event of bankruptcy.
He wouldn’t be the first white-collar felon to seek to escape the clutches of creditors or litigants. In the early 1990s, Martin Siegel, a former Wall Street investment banker convicted of insider trading, also moved from Westport, Conn. to a $3.25 million, 7,000-square foot beachfront home in an upscale Jacksonville, Fla. suburb, protecting his assets from a $2.75 billion civil suit.
So far, Goldman, Sachs, on whose board Mr. Gupta sat, has been footing the bills because the bank’s bylaws require it to pay the legal fees of its top officers and directors. Goldman is required to pay until Mr. Gupta has exhausted all avenues of appeal. Shortly after he was convicted of insider trading charges in 2012, Mr. Gupta hired noted appellate lawyer and a former United States solicitor general, Seth P. Waxman, to handle his appeal.
But Mr. Waxman has had little success pressing Mr. Gupta’s case. In March, a three-judge panel of the United States Court of Appeals for the Second Circuit upheld Mr. Gupta’s conviction. The court is considering his request to rehear his appeal.
Besides arguing that the wiretap recordings that helped convict Mr. Gupta were improper, a major element of his appeal will be that the lower courts erred on the question of whether a defendant is entitled to a jury instruction that ”character testimony may in and of itself raise a reasonable doubt.”
Mr. Gupta’s lawyers have argued that the lower courts decision on this point contravenes the Supreme Court’s position.
His fight to overturn his conviction has not been cheap. His total legal costs — including fees paid to his trial lawyers at Kramer Levin Naftalis & Frankel and to consultants and experts — stands at roughly $40 million.
In a deal hashed out with Goldman, Gupta agreed before his trial that he would reimburse the bank for his legal bills if he was found guilty of insider trading and his conviction was upheld. Last February, a federal judge ordered Mr. Gupta to pay Goldman more than $6.2 million for the legal expenses that the investment bank incurred in connection with his insider trading case, meaning that once all his appeals are exhausted Mr. Gupta is likely to owe Goldman about $50 million.
At one time, it appeared that the former McKinsey chief had ample assets. During his trial, a JPMorgan Chase private banker testified that Mr. Gupta had a net worth of more than $130 million in the spring of 2008 . But, like many, Mr. Gupta lost money during the financial crisis and several of his income streams—board of director fees, for instance, and payouts from McKinsey—have dried up since his legal troubles have come to light.
In recent weeks, anticipating that he will be away from his family for two years when he surrenders on June 17 to begin his prison sentence, Mr. Gupta has been spending time with each of his four daughters, taking short breaks with them. He recently returned from a trip with one to the Grand Canyon, a friend says.
During his years at the helm of McKinsey, Mr. Gupta was among Manhattan’s power elite, often seen lunching at hotspots such as the Four Seasons Grill Room. But since his conviction in 2012, Mr. Gupta rarely ventures to New York; he hasn’t been seen at the Grill Room for years, and a sighting of him in December at upscale San Pietro had diners buzzing. Nowadays, a more common sight is Mr. Gupta walking along the brook of his Westport, Conn., house with his dog in tow.
In one of his rare public appearances last year, he ventured to Washington to attend a strategy session convened by alumni for the Indian Institutes of Technology. Mr. Gupta and his wife, Anita, attended I.I.T. Delhi and, at the meeting, he told the group that he planned to go down fighting because he passionately believed in his innocence.
He already is contemplating a future after prison. In the past year, he has been working on a book, telling his side of the story, say friends, and even though his star has faded in the United States, he is still popular in India. Before his trial, some of India’s biggest industrialists, like Mukesh Ambani, wrote letters of support and, once he is released, he has told friends that the first place he wants to visit is his homeland, India. A federal court judge rejected his request this year to travel to India for a nephew’s wedding.
Like his former colleague, Anil Kumar, who pleaded guilty to giving corporate secrets to Mr. Rajaratnam and now spends most of his time in India, Mr. Gupta will have no trouble lining up consulting assignments from Indian companies. But his sterling calling card—offering Indian executives unparalleled access to American chief executives and politicians—will be badly tarnished.
Anita Raghavan is the author of “The Billionaire’s Apprentice: The Rise of the Indian-American Elite and the Fall of the Galleon Hedge Fund,” published by Business Plus.
http://dealbook.nytimes.com/2014/06/13/ex-gol...f-freedom/
