Gupta defied McKinsey before SEC action

By John Helyar, Carol Hymowitz and Mehul Srivastava, Published: May 22

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.
顾磊杰虽被朋友们看成身处岌岌可危的边缘，但他似乎仍悠闲自得地生活在位于康州避暑胜地韦斯波特的豪宅中。在2008年6月为最小的四女儿举行的婚礼上，他还潇洒地与数百位全球各地的宾客同庆女儿的大喜。婚礼的豪华程度被来宾们称为本十年之冠。这不仅是一个显示顾磊杰富足程度的场合，而且还是表现他企业领导人地位的时机。顾磊杰，这位全球著名咨询机构麦肯锡的前董事总经理、全球许多大企业CEO的贴心顾问，担任过美国航空、宝洁和高盛的董事，并出任洛克菲勒和盖茨-梅琳达基金会的理事。但此时，他还成了诚信受到人们极大质疑的极少数商界领袖之一。
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.


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.

During the past decade, Gupta, who was already a millionaire, began to spend more time with Wall Street money managers. He told colleagues that he wanted to be a dealmaker, not just a consultant. Gupta declined to comment for this story.

Gupta’s quest to amass great wealth led him to lapses in judgment, says Bala Balachandran, dean of the Great Lakes Institute of Management in Chennai, and a friend for almost three decades.

“He wanted a billionaire’s life, and the question for him was how could he become a billionaire in a short time,” Balachandran says.

In December 2006, two years before he reached McKinsey’s mandatory retirement age of 60, Gupta co-founded private-equity firm New Silk Route Partners with investors, three of whom had paid fines to settle SEC actions against them.

Among the three was Rajaratnam, whose Galleon Group paid $2 million in a fine and forfeited profits to the government in May 2005 to settle an SEC complaint that it had made improper trades.

Parag Saxena, a money manager, paid a $250,000 fine in 1994 to settle civil claims that he had received pre-initial-public-offering stock in companies at discounts and then recommended the shares to his clients at Chancellor Capital Management, after the companies went public.

In 2006, Victor Menezes, a former Citigroup executive, paid $2.7 million in a fine and forfeited trading profits to settle SEC charges that he sold Citigroup holdings ahead of an announcement of losses from a subsidiary in Argentina.

Balachandran says he warned Gupta of his choice of business partners.

“You’re an eagle, so why do you want to be with these chickens who can’t fly?” Balachandran says he told Gupta. “You’ll get the chicken flu.”

Gupta hasn’t been charged with a crime in the Galleon insider-trading scandal. The SEC action against him is a civil complaint, which could bring a fine and a consent decree that could bar him from serving on public company boards.

Gupta and Rajaratnam have known each other since the 1990s. Gupta invested $10 million of his own money with Rajaratnam, according to Gupta’s lawyer, Gary Naftalis. Gupta gave Rajaratnam more than money; according to prosecutors at Rajaratnam’s trial, he passed along information on Goldman and P&G.

Justice Department prosecutors called Gupta an unindicted co-conspirator. They presented wiretap evidence to the Rajaratnam jury showing that Gupta had told the hedge fund manager that in 2008 Goldman Sachs’s board was discussing possible acquisitions of American International Group or Wachovia.

Gupta also gave Rajaratnam early word on earnings at Goldman Sachs and P&G, the SEC says in its action.

Gupta sent an e-mail in late February to fellow directors of the Indian School of Business, declaring his innocence.

“I have done nothing wrong,” he wrote to the board of the school, which he co-founded in 2001 in Hyderabad. “The SEC’s allegations are totally baseless.”

The Kumar conviction and the SEC action against Gupta have been a blow to McKinsey’s elite image.

Old boys’ club

Until the 1970s, the firm was the ultimate old boys’ club, where consultants were required to wear hats and long, dark-colored socks, with white, button-down cotton shirts and conservative suits. Gupta was the first nonwhite elected managing director of the firm.

当顾磊杰2006年仍在麦肯锡工作时，他曾试图创建自己的私人股权投资公司和对冲基金，而最初协议便是与拉贾拉特南签订。但是，他的首次努力因故停滞，他在数月后与花旗银行前高管、投资机构Invesco Private Capital的董事总经理Parag Saxena一道成功创建了私人股权投资基金New Silk Route，其业务方向是投资印度和其他新兴经济体的创业企业。该基金最终筹资高达13亿美元，其中5000万美元来自拉贾拉特南。

　　顾磊杰2007年与拉贾拉特南共同创设了另一家企业，以帮助建立GB Voyager Multi-Strategy基金，其4000万美元母基金将投资于数个对冲基金公司帆船集团麾下的对冲基金，其中包括后来SEC公开的投诉文件显示的，一些经过顾磊杰非法点拨的基金。顾磊杰向GB　Voyager Multi-Strategy基金投入了1000万美元，但他的律师Gary Naftalis称，这笔投资都亏光了。然而，负责拉贾拉特南案子的联邦检察官提交的帆船集团的记录显示，帆船集团账簿记录的顾磊杰在Voyager Multi-Strategy基金的投资为1640万美元。据联邦检察官提供的案件审理中的证词和电话监听的记录，顾磊杰当时为吸引更多基金投资者和出任该基金的董事长，欲索取10-15%的帆船集团国际基金份额，而与拉贾拉特南讨价还价。

　　目前尚不清楚顾磊杰究竟何时与拉贾拉特南开始勾结。拉贾拉特南约在1999年向印度海德拉巴地区的印度商学院捐助了一大笔资金，顾磊杰帮助前者筹了款。在此次捐款后，拉贾拉特南接着也捐助了美国印度基金会(AIF)。该慈善团体主要是由上流社会中富有的印度和美国人构成，而顾磊杰也是该团体的创始人之一。为了回报顾磊杰的资助，斯里兰卡出生的拉贾拉特南变为AIF的理事，由前总统克林顿担任AIF的名誉董事长。到2000年中期时，顾磊杰与拉贾拉特南已成为密友。

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