Rajat Gupta, the former Goldman Sachs director and McKinsey & Co. managing director, was sentenced to two years in prison and ordered to pay a $5-million fine for leaking stock tips and board dealings to his friend and business associate, hedge-fund manager Raj Rajaratnam.
Gupta, 63, of Westport, Conn., who reigned at the pinnacle of Wall Street for his business smarts, fell in to disgrace after he was named in a five-year crackdown on insider trading by the federal agencies. Announcing the sentence, the U.S. District Court Judge Jed Rakoff, ordered him to report to prison on January 8, 2013. He will face one year of supervised release after finishing his prison term.
"I regret terribly the impact of this matter on my family, friends and the institutions that are dear to me. I have lost my reputation I built for a lifetime. The verdict is devastating." Gupta said in a statement after the sentencing was announced.
The judge said the fact that Gupta leaked information about Goldman Sachs to Rajaratnam was "not only overwhelming, it was disgusting in its implications." However, Rakoff said he would recommend the U.S. Bureau of Prisons officials that Gupta serve his term at the federal prison in Otisville, New York.
"With Goldman Sachs in turmoil but on the verge of being rescued from possible ruin by an infusion of $5 billion, Gupta, within minutes of hearing of the transaction, tipped Rajaratnam, so that the latter could trade on this information in the last few minutes before the market closed," the judge said just before he imposed sentence. "This was the functional equivalent of stabbing Goldman in the back."
Seeking a prison term of as long as 10 years for Gupta, prosecutors argued that his crimes warranted a substantial prison time because of his prominence in the business world and the egregiousness of his crimes. U.S. Attorney Richard Tarlowe strongly opposed a sentence of probation which he said would give the impression that there is "a two-tier system of justice."
Gupta's lawyer Gary Naftalis sought probation and community service for the Harvard-educated businessman and proposed that he work with needy children in New York or the poor in Rwanda. Naftalis argued that his client should be given leniency as he has suffered enough with his reputation destroyed for no personally profit.
