Dr Jay Dubashi
RAJAT Kumar Gupta, once the great bright star of the American corporate world, has become its bad boy. He himself does not know why a man with so many years at the top corporate level in the US suddenly went berserk, and did the things he did and which he was not supposed to do, but that is only one part of the tragedy. The other part is that he will go to jail in New York for two years, unless he succeeds in getting a pardon, which, in his particular case, seems unlikely.
Gupta is a quintessential Delhi boy. He was born in Calcutta, not Delhi, but he grew up in Delhi, went to Modern School, Barakhamba Road, only a kilometre from Connaught Place, and IIT, Delhi, and from there to Harvard Business School in the US. Harvard made him what he became, a high-powered corporate tycoon on boards of companies like Goldman Sachs and Procter & Gamble.
Why did such a man, worth 85 million dollars, or about Rs 450 crore, with a number of houses in the US, and probably a yacht too, do what he did, that is, started feeding inside information to a friend who then used it to make money, something against the law? He himself did not make any money, but his friend, an Indian-origin Sri Lankan, did and spilled the beans. The friend is now in prison, where Gupta will join him in January.
In India, insider trading, as it is called, happens all the time, but neither the government nor the stock market people bother about it too much, just as they don’t bother about how you collect money for your companies, and from whom. We have created a new type of capitalism, a capitalism without rules, but things are different in the US, and scores have ended up in jail for flouting the rules.
In America, things like insider trading are poison. If you are director of a company, you keep all the secrets to yourself and don’t make money out of it. You can’t even say anything to your wife or friends, and must keep your mouth shut. Rajat Gupta must have known this but fell prey to his friends pressure.
It has probably something to do with the high-pressure atmosphere of the corporate life in the US, where, at a certain level, so much information is available to you, that you do not know what is inside information and what is public knowledge. Newspapers like Wall Street Journal are all the time flashing “inside” information, knowing it to be “inside”. If it is published in a newspaper, it is public information, not private. Gupta is supposed to have told his friend that a company was going to purchase a million shares of Goldman Sachs, which means the shares would go up the instant the news became public. Gupta’s friend is said to have made a million dollars on the deal, though Gupta himself made nothing.
Gupta’s friend also went to business school, but he was apparently cut from a rough cloth. He was, after all, a share broker and did not sit on boards of prestigious companies, as Gupta did. This makes a lot of difference. A director’s chair is different from a share broker’s chair, and normally the two don’t go together. The very fact that Gupta mixed with stock brokers was, I think, the beginning of his end.
I have seen this happen a number of times before. A poor choice of friends can lead to lot of trouble. Never get too close to people or circles whose standards, that is, moral standards, are different from yours. It is not that you are superior to them, just different. The clash of moral values leads or may lead to aberrations that ultimately are liable to lead to criminal acts.
Another case I know is that of VK Krishna Menon. Menon was a footloose young man living in London between the wars, and lived, to put it kindly, by his wits. He had no regular job and used to publish pamphlets now and then and hawk them, or rather flog them, around hostels housing Indian students. During the war, he ran an organisation called India League for which he collected money by panhandling. Around this time, he came in contact with some unsavoury characters – taxi drivers, hair dressers, waiters, etc. – who became his friends. You must remember that Menon was a certified socialist, a member of the Labour Party, and umpteen Leftist organisations.
He did not drop them when he became High Commissioner for India in 1947 – and Nehru’s right hand man in London. I used to be friendly with him before he became High Commissioner and he asked me to join him at India House. I discovered that he used to hold parties in the evening – once or twice a week – in his private apartment adjoining his office to which he invited his old friends from the underworld.
Sometimes, I was obliged to attend these parties, which often became rather noisy. Menon’s friends, who frequented these parties, often said that he himself, that is, Menon, belonged to the underworld, which may or may not be true. It was all very respectable but the guest list was drawn exclusively from the proletariat!
I have a feeling that Menon’s too close an association with the underworld may have led to the later scandals involving purchase of second-hand jeeps and other defence equipments which eventually got him into trouble. The kind of people with whom he caroused – they were all men – were exactly the kind of people who deal in second-hand vehicles and possibly second-hand defence ordnance, of which there was plentiful supply after the war. One thing led to another and Menon got himself involved in shady transactions that led to scandals later on. Menon may have been an intellectual – he had a wide range of friends among left-of-centre writers like George Orwell and EM Forster as also in the theatre.
Our friend Rajat Gupta almost certainly got carried away, as one often does, in the new fraternity of stock brokers and hedge merchants, which was not exactly his métier, but which fascinated him so much that he fell for them.
After following a straight and narrow path in the corporate world, he found himself in the new exciting world of cut-throat business of stock broking or gambling, which he simply could not resist. And like Krishna Menon, who, at one time was editor of Penguin books, just got carried away to his doom – in his case, but not in the case of Menon – a dark prison cell.
It is a sad story that keeps repeating itself when you are bored with your job and crave for some excitement. And there are always devils in the dark, leading you to your final doom, as in the case of Rajat Kumar Gupta and VK Krishna Menon.