United States (The Wall Street Journal)
Former Goldman Sachs Group Inc. GS +0.65% director Rajat Gupta was sentenced to two years in federal prison for leaking corporate secrets about the bank to a hedge fund at the height of the financial crisis.
The prison term imposed by U.S. District Judge Jed Rakoff in Manhattan marks a nadir for Mr. Gupta, who became the most prominent figure caught in the push against insider trading by criminal authorities. He was implicated in 2010 in the investigation of former Galleon Group chief Raj Rajaratnam, his friend and business associate.
His tip about Berkshire Hathaway Inc.'s BRKB -0.01% impending investment to shore up Goldman during the crisis was "disgusting in its implications" and "a terrible breach of trust," said Judge Rakoff before he handed down the sentence. He added: "Others similarly situated to the defendant must…be made to understand that when you get caught, you will go to jail."
Read The Journal's previous coverage of developments in the Galleon insider trading case, which exposed links between corporate insiders and a hedge fund that used tips to make profits. The case has netted several high-profile prosecutions.
The judge also ordered Mr. Gupta, the former head of McKinsey & Co., the global consulting firm, to pay a $5 million fine and said he would face one year of supervised release after finishing his prison term. Prosecutors had asked for a term of up to 10 years. He is appealing his conviction.
There is no parole, but defendants usually serve only 85% of their sentences, so Mr. Gupta could be out in less than 21 months.
Wearing a dark blue suit and light blue tie, Mr. Gupta leaned back with his mouth turned down during the hearing and showed no visible reaction when the judge announced the sentence.
"The last 18 months have been the most challenging period of my life since I lost my parents as a teenager," he told the judge before sentencing. "I lost my reputation that I built over a lifetime."
Under Manhattan U.S. Attorney Preet Bharara, 72 people have been charged with insider trading since late 2009, and 69 have pleaded guilty or been convicted.
So far, 37 of those people have been sentenced to a total of roughly 68 years in total prison time. Thirteen of those cooperated with the government, all but one of whom got probation.
Criminal complaints and developing disclosures in the Galleon insider trading case allege a far-reaching and complex scheme. Here, the known and alleged relationships.
The sentence comes as Mr. Rajaratnam, the central player in the recent insider-trading scandal, plans to appeal his conviction Thursday in a New York federal appeals court. Mr. Rajaratnam is serving an 11-year prison sentence for insider trading. Another insider-trading trial is set to begin next week.
Mr. Gupta, 63 years old was criminally charged last year with divulging information about Goldman and Procter & Gamble Co., PG +0.95% where he also was a director. In June, a jury found Mr. Gupta guilty of three counts of securities fraud and one count of conspiracy for giving Mr. Rajaratnam tips about Goldman during the financial crisis, sometimes just moments after he learned of them, including that Warren Buffett's Berkshire Hathaway would invest $5 billion in the bank in 2008.
Goldman said in a statement: "We are disappointed that Mr. Gupta breached his duties as a director and violated our shareholders' and the firm's trust. We hope today's decision brings this sad chapter to a close."
Mr. Rajaratnam used the tips to earn millions of dollars for Galleon, prosecutors said, though Mr. Gupta didn't trade on them himself. Prosecutors said he benefited from his business relationships with Mr. Rajaratnam. Mr. Gupta was acquitted of two securities-fraud charges, including the only one relating to P&G.
Under federal sentencing guidelines, prison terms for insider-trading cases are largely based on profits, or the losses avoided, because of the illegal tips. The defense disputed the guidelines prosecutors and a probation officer had calculated for Mr. Gupta, and Judge Rakoff determined a lower range of 6.5 to eight years. The guidelines are advisory, and Judge Rakoff often imposes sentences below them.
Judge Rakoff received letters of support for Mr. Gupta from hundreds of prominent supporters, including Microsoft Corp. MSFT -0.52% co-founder Bill Gates, the Indian doctor Deepak Chopra, and former U.N. leader Kofi Annan.
Their contentions that Mr. Gupta deserved leniency because he had lived an otherwise exemplary life and given many years to health-care, poverty, education and other philanthropic causes, were set against the legal requirement that a judge issue a sentence that will discourage others from similar crimes.
Mr. Bharara said in a statement: "With today's sentence, Rajat Gupta now must face the grave consequences of his crime—a term of imprisonment…We hope that others who might consider breaking the securities laws will take heed from this sad occasion."
Recent Insider-Trading Sentences
Since 2010, the 26 insider-trading defendants who didn't cooperate with prosecutors have received an average sentence of two years and 10 months. That was 36% below the midpoint of their average federal guideline range of 37.5 to 46.5 months.
Judge Rakoff, who has criticized the guidelines as simplistic and severe, issued six sentences in that period, not including Mr. Gupta's, that averaged 21 months and were 46% below the midpoint of the guidelines, lower than his colleagues.
Mr. Gupta's lawyers argued that he be given probation and ordered to do "rigorous" community service, possibly in rural Rwanda, an idea the judge dismissed as a kind of "Peace Corps for insider traders."
Judge Rakoff said it was unquestionable that Mr. Gupta was "a good man."
"But the history of this country and the world, I'm afraid, is full of examples of good men who do bad things," he said.
The judge denied a request by Mr. Gupta's lawyers to allow him to remain free during his appeal. He must report for prison on Jan. 8. The judge, at the request of Mr. Gupta's lawyer, said he would recommend Mr. Gupta be sent to the minimum security prison in Otisville, N.Y.
Mr. Gupta's was a classic American success story. He grew up in New Delhi, excelling academically despite the death of both his parents when he was in his teens and coming to the U.S. to attend Harvard Business School. In 1973, he joined McKinsey in New York and climbed the ranks there for two decades until he was elected managing director in 1994 at age 45, becoming the first Indian-born chief of a U.S. multinational corporation.
Mr. Gupta was a founder of the Indian School of Business in Hyderabad, chairman of the Global Fund to Fight AIDS, Tuberculosis and Malaria, and worked with former President Bill Clinton at the American India Foundation.
The criminal case forced Mr. Gupta to withdraw from his positions on corporate boards and philanthropic groups. His supporters, from corporate CEOs down to his barber and tailor, urged the judge to let him continue in charitable work.
"This is a fall from grace of Greek tragic proportions," Mr. Gupta's lawyer, Gary Naftalis, told the judge in pleading for leniency. "I think he has suffered punishment far worse than prison already."
Write to Michael Rothfeld at email@example.com and Dan Strumpf at firstname.lastname@example.org
By Michael Rothfeld and Dan Strumpf, The Wall Street Journal, October 25, 2012
Kingfisher Airlines on Monday night declared a partial lock-out with immediate effect and suspended till Thursday flight operations which came to a grinding halt following a strike by a section of its employees.
In a statement, the Vijay Mallya-owned private carrier said it has been forced to declare a “partial lock-out” following a series of “protracted and unabated incidents of violence, criminal intimidation, assault, wrongful restraint and other illegal acts” including refraining from attending work, by a small section of “recalcitrant” employees.
The airline said the action by the recalcitrant employees who have regrettably chosen to take law into their own hands forcing a complete paralysis of operations were all “unnecessary and unprovoked.”
“It has been decided that flight operations will be suspended for the next 3 days, i.e. until October 4, 2012,” it added.
The operations got completely paralysed on Monday after pilots and some other staff joined the striking engineers protesting non-payment of salaries for the last six months, sending the shares of the airline tumbling by 5 per cent.
Before commencing legal action, the airline said it will make efforts to continue to engage with striking employees to persuade them not to indulge in any intimidatory tactics.
PTI, October 2, 2012
Mumbai and New Delhi, India
Swedish retailer IKEA, the world's largest furniture maker, is opening up in India, marking a crucial step for the Indian government whose policy flip flops related to foreign investment have damaged market confidence.
The company, known for huge stores selling flatpack furniture and accessories, said it would invest 1.5 billion euros to open 25 stores in Asia's third-largest economy after initially balking at India's sourcing requirements.
IKEA's plans, announced by the Indian government after a meeting between the company's CEO and India's trade minister in Russia, could give a boost to the embattled government of Prime Minister Manmohan Singh, which was forced in December to backtrack on plans to allow in foreign supermarket operators.
While the government removed foreign investment caps in single-brand retail in January, it imposed a condition that foreign retailers source 30 percent from local small and mid-sized enterprises, dampening the enthusiasm of retailers for the plan.
"It's a baby step but it has definitely sent the right signal out ... The government is trying to convince international investors, India is still open for business," said Devangshu Dutta, consultant with Third Eyesight, a retail consultancy said.
The Indian economy which grew at its slowest pace in nine years has been badly hit by political roadblocks to economic policymaking battering corporate investor sentiment.
But the company, following similar moves in China and Russia, plans to cash in on India's burgeoning urban middle class, which, having grown up on pop culture, generates a strong demand for owning international brands and lifestyle products such as furniture.
On Friday, India said the company had discussed its reservations over the sourcing policy with the government.
"IKEA had certain reservations about sourcing norms which were discussed with the DIPP (Department of Industrial Policy and Promotion) officials; suitable answers of which were provided leading to the decision to invest," the Indian government said in a statement.
The company does not yet have any stores in India but sourced $450 million worth of goods from the country last year, a figure it aims to lift to $1 billion in coming years.
It sources goods such as textiles and carpets from 70 suppliers and 1,400 sub-suppliers in the country, the company said.
"The mandatory sourcing clause that requires goods to be sourced from small and medium enterprises will remain a challenge," IKEA spokeswoman Malin Pettersson Beckeman told Reuters by phone on Friday.
The Singh government is keen to bring global supermarket chains such as Wal-Mart Stores Inc (WMT.N) and Carrefour SA (CARR.PA) into India, in hope of improving the efficiency of supply chains in a country where roughly one-third of fresh produce rots before it gets to market.
However, foreign direct investment in supermarkets has been opposed by owners of one-off shops, which account for roughly 90 percent of India's $450 billion retail sector, as well as by members of the ruling coalition.
IKEA said its investment will be made over 15 to 20 years.
India's Commerce Ministry said IKEA will initially invest 600 million euros and a further sum of up to 900 million.
"These investment estimates have been drawn up based on our experience in countries like China and Russia," Beckeman said.
Industry officials, however, said that the Swedish firm's entry will not really shake things for the domestic market given the number of stores it plans and the period of investment.
"It's not going to shake up the entire domestic market but it will set a benchmark model for others to follow in India's nascent furniture and home products market," Dutta said.
By Nandita Bose and Matthias Williams, Reuters, June23, 2012
(Writing by Sanjeev Choudhary; Editing by Tony Munroe and David Holmes)
Rajat Gupta's four-decade journey from India to the upper echelons of American business and a board seat at Goldman Sachs Group Inc GS +1.96% . ended after less than 10 hours of deliberation by a federal jury, which convicted him of insider trading.
The verdict caps the fall of the most prominent figure caught in the government's drive to stop the leaking of corporate secrets to Wall Street. The U.S. said Mr. Gupta, 63 years old, once one of America's most-respected corporate directors, was motivated not by quick profits but rather a lifestyle where inside tips are the currency of friendships and elite business relationships.
A former director at Goldman and Procter & Gamble Co., PG -0.47% Mr. Gupta was convicted on three counts of securities fraud and one count of conspiracy for passing along confidential boardroom information about Goldman to a hedge fund that earned millions of dollars trading on his tips. He was acquitted of two counts of securities fraud, including the only one relating to P&G.
Mr. Gupta, who is also a former head of McKinsey & Co., faces up to 20 years in prison on each of the fraud charges and up to five years for the conspiracy charge. But his sentence is likely to be significantly lower under federal guidelines. Sentencing is set for Oct. 18.
The 12-member jury, sitting in a New York federal court just blocks from Wall Street, handed up a quick verdict after a four-week trial. Janeat Brown, a 32-year-old fourth-grade teacher who was juror No. 5, said that in the first few hours of deliberations, 11 of 12 jurors believed Mr. Gupta was guilty.
By contrast, jurors deliberated 12 days last year before convicting hedge-fund titan Raj Rajaratnam, who now is serving an 11-year prison term. Some jurors shed tears after the verdict was read, as Mr. Gupta's daughters, who had sat in the front row throughout the trial, sobbed and hugged one another.
"We wanted him to walk, go home to his family, live a very prosperous life," said juror Ronnie Sesso, a 53-year-old youth advocate in New York. "I struggled with everything…. But looking at the evidence made it clear."
An appeal is likely. "We continue to feel Mr. Gupta is innocent of all the charges," said Gary Naftalis, his lawyer. "He didn't trade, he didn't tip Mr. Rajaratnam. He didn't receive a dishonest dime."
Goldman said in a statement, "We are very disappointed that Mr. Gupta breached his duties as a director and violated our shareholders' and the firm's trust."
Ex-Goldman Sachs director Raj Gupta was convicted Friday of insider-trading charges. Colin Barr joins Lunch Break with the latest. Photo: AP.
On Thursday morning, only one juror wasn't convinced Mr. Gupta was guilty, according to Ms. Brown, the teacher. This person had previous experience in financial services and repeatedly drew upon it to make their case, according to Ms. Brown.
"It was sort of frustrating to know that the evidence was there but personal experience was being brought into it," she said.
The other jurors kept saying they needed to make a decision based on the evidence, she said. The group then went around the room and examined the evidence. After a full day of deliberations, the 12th juror was finally convinced of Mr. Gupta's guilt.
Ms. Brown was a holdout herself on count No. 6, securities fraud related to the purchase of 180,000 shares of Procter & Gamble. She said she believed Mr. Gupta was guilty of tipping Mr. Rajaratnam about P&G. On Friday morning, when she heard the others' arguments about why he was innocent, she says she changed her mind and voted not guilty.
Mr. Gupta, who is free on bail until his October sentencing, is perhaps the most prominent defendant ever convicted of insider trading. While arbitrager Ivan Boesky was well-known at the time of his guilty plea in the 1980s, he wasn't as deeply embedded in American corporations as Mr. Gupta, who advised many high-profile chief executives. Junk-bond trader Michael Milken was indicted in an insider-trading investigation but pleaded guilty to other charges. Martha Stewart was also probed for insider trading but convicted of obstructing justice.
The verdict was a huge victory for prosecutors, and could embolden them to bring more insider-trading cases without the use of wiretaps, lawyers say.
Much of the evidence against Mr. Gupta was circumstantial, including phone records that showed he promptly called Mr. Rajaratnam after receiving confidential information. The billionaire founder of hedge fund Galleon Group then ordered his funds to trade on the inside information.
"Mr. Gupta has now exchanged the lofty board room for the prospect of a lowly jail cell," said Preet Bharara, the U.S. attorney in Manhattan. "Violating clear and sacrosanct duties of confidentiality, Mr. Gupta illegally provided a virtual open line into the board room for his benefactor and business partner, Raj Rajaratnam."
Mr. Gupta—a figure out of central casting with a square jaw, silver hair and distinguished bearing—sat erect with his hands clasped in his lap during the trial. Friends said he wanted to testify in his own defense that he was innocent.
"He just wants to get it out," Anil Sood, a friend from Mr. Gupta's childhood in India who testified as a character witness, said in the closing days of the trial, adding that Mr. Gupta was angry and frustrated over the prosecution.
Ultimately, Mr. Gupta took the advice of his lawyers, and the urging of his family, and elected not to take the stand, believing his best chance at acquittal was to raise doubts about the government's case, said Mr. Sood in an interview.
Any appeal would be likely based in part on an argument that the judge improperly allowed the government to play certain wiretaps in which Mr. Rajaratman bragged to associates about inside tips, Mr. Naftalis indicated. The defense had objected to those tapes as hearsay.
Mr. Naftalis said Mr. Gupta plans to ask U.S. District Judge Jed Rakoff to set aside the verdict and will appeal if he allows the verdict to stand.
A native of Kolkata, Mr. Gupta moved at a young age to New Delhi, where he thrived despite the deaths of his mother, a teacher, and his father, a freedom fighter against the British and journalist, when he was in his teens. Mr. Gupta studied engineering at the Indian Institute of Technology and came to the U.S. in 1971 to attend Harvard Business School.
Two years later, he broke into McKinsey, a top-tier consulting firm for America's most powerful corporations. In 1994, at age 45, he became the first non-American-born leader of the firm, which then had $1.3 billion in annual revenue. Later, Mr. Gupta helped his alma mater in India start the Indian School of Business in Hyderabad, with donations he sought from corporate executives.
There was drama in the courtroom Friday. For a moment, after the jury foreman, Richard Lepkowski, said Mr. Gupta wasn't guilty on the first count, some in attendance thought he might be acquitted of all the charges. But after Mr. Gupta was found guilty on the second count, his daughters broke down in sobs in the front row behind him, collapsing on one another. Mr. Gupta's wife, Anita, leaned back, staring at the ceiling, then leaned forward, burying her face in her arms.
Mr. Gupta, sporting a dark suit and a red spotted tie, showed no reaction. He pushed slowly through a throng of reporters outside the courthouse, his back arched straight, and into a waiting car with his family. Mr. Gupta didn't speak.
Prosecutions of insider trading based on circumstantial evidence once were common, but since 2009 federal authorities in New York have strengthened their hand by using wiretapped phone calls to obtain 62 convictions and guilty pleas out of 68 people charged.
Mr. Gupta's defense team, besides pointing out the lack of such direct evidence against him, sought to persuade jurors that he had a falling out over $10 million that he had lost in an investment with Mr. Rajaratnam, negating any motive he would have had to provide the tips.
Mr. Lepkowski described Mr. Gupta as "the American dream." But he said jurors were influenced by wiretaps of Mr. Rajaratnam bragging to associates that he'd received tips about Goldman, and by a recording on July 29, 2008, of Mr. Gupta speaking with Mr. Rajaratnam about what had happened at a Goldman board meeting.
Defense lawyers tried in vain to keep the tape out of the trial because they said the information was already public and Mr. Rajaratnam never traded on it. Prosecutors said it showed the relationship between the two.
The four-week trial had as its backdrop the financial crisis that exploded in the fall of 2008, when Mr. Gupta was accused of giving Mr. Rajaratnam inside information on two issues crucial to Goldman's financial health: a $5 billion investment by Warren Buffett's Berkshire Hathaway Inc. BRKB +1.04% and the bank's first quarterly loss as a public company.
Prosecutors said Mr. Gupta, who invested with Mr. Rajaratnam at Galleon in various ventures, tipped him off because of their friendship and business interests. Their relationship was so close, prosecutors said, that Mr. Gupta had open access with his own keycard to Galleon's Midtown Manhattan office.
The defense countered that there was no evidence Mr. Gupta profited, or traded on, any alleged tip.
Prosecutors were able to piece together a pattern of telephone and trading records, supported by the testimony of witnesses, including Goldman Sachs Chief Executive Lloyd Blankfein. Prosecutors accused Mr. Gupta of phoning Mr. Rajaratnam time and time again immediately after learning of big developments at the companies in which he served as a director.
By Chad Bray, Michael Rothfeld and Reed Albergotti, The Wall Street Journal, June 17, 2012
Julie Steinberg, Juliet Chung and Dan Strumpf contributed to this article.
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The long-awaited Indo-French agreement to set up two 1,650 MW nuclear reactors at Jaitapur may be signed within the next few months, top sources in the government said.
To be inked between French energy major Areva and Nuclear Power Corporation of India Ltd (NPCIL), the commercial contract is still being negotiated between the two sides as India wants to further lower the cost. Asked about the future of Jaitapur project, which is stuck for close to two years, sources told Deccan Herald: “There are still some financial issues. We are trying to bring down the cost as far as possible. The agreement will be signed in the second half of this year.”
Nuclear cooperation between India and France is likely to figure in Prime Minister Manmohan Singh’s bilateral discussion with newly elected French President Francois Hollande on the sidelines of G20 summit in Los Cabos, Mexico.
India wants Areva to set up six of its 1,650 MW EPR reactors at Jaitapur, making it the country’s largest nuclear park which will generate 9,900 MW of energy. The agreement being negotiated is for installing the first two of the six units.
The project was hit first by agitation on land acquisition and subsequently due to Fukushima nuclear disaster after which India wanted French Nuclear Safety Authority to have a re-look at the EPR design and suggest modifications if needed. Department of Atomic Energy received the review in January 2012, it was scrutinised by DAE and Atomic Energy Regulatory Board. Threads of commercial negotiations then were picked up again by both sides. Meanwhile, land acquisition in Jaitapur has been completed and a few ancillary constructions were carried out in the last one and half years. The wait now is to formal signing of the agreement and Cabinet approval.
In the wake of protests on land acquisition and setting up of nuclear plants in coastal areas, Maharashtra government took several administrative steps including framing a new rehabilitation package to calm down frayed nerves.
But, anti-nuclear activists in all probability may return to Jaitapur once the project starts as they claim establishing six nuclear plants would destroy the livelihood of fishermen and ruin coastal biodiversity.
By Kaylan Ray, June 17, 2012
New Delhi, India
With Air India considering further crackdown on the striking pilots, the government today said it is for airlines management to decide for how long to keep them on their payroll when they are not working.
It "is for the Air India management to take action now. These pilots have not come to work for more than 30 days....It is an illegal strike. They have defied the high court," civil aviation minister Ajit Singh said.
"We have requested them again and again to come back to work. So, it is for the management to decide for how long can they keep them on their payroll when they are not working. And they have no intention of coming back," he told reporters.
Around 400 Air India pilots owing allegiance to Indian Pilots Guild (IPG) have been on strike since May 7 and the services of 101 pilots have already been terminated.
Sources in the state-owned airline have said "tough action" would be taken against the remaining 300-odd pilots and have given indications that they could be sacked.
PTI, Hindustan Times, June 11, 2012
New Delhi, India
With the aviation sector facing acute crisis, civil aviation minister Ajit Singh is unhappy over the recent increase in service tax on air tickets and high jet fuel price and would take up the issue with Prime Minister Manmohan Singh for a re-look into the matter.
Ajit Singh, who has already written to finance minister Pranab Mukherjee and plans to consult him again, underlines that the increase effected recently in the service tax on air tickets and levies on aviation turbine fuel (ATF) is hurting the aviation sector.
Earlier, service tax was levied on 10 per cent of the total value of the ticket with a cap of Rs 100 for domestic ticket and Rs 500 for international ticket. This has been hiked to 40 per cent of the total value of the ticket without any cap, he told PTI in an interview.
With regard to ATF price, he said it was at least 50 per cent higher here than in places like Singapore and Sharjah and determined not in "transparent" manner.
"Both these issues I will take up...I had written to the Finance Minister long time ago, I will write to him again and I will consult him. I will talk to the Prime Minister also," an unhappy Ajit Singh said.
Talking about service tax, he said, "no other country" imposes it on international passengers while for domestic passengers, it is uniform under GST, on which they get offset.
Referring to the increase in service tax on air tickets, the Minister said, "it is really hurting the passenger fares."
PTI, June 10, 2012