NEW YORK: Rajat K Gupta , the former Goldman Sachs director accused by the government of passing insider information about the Wall Street firm, had tried to resign from the Goldman board in the middle of the 2008 financial crisis, only weeks before he is alleged to have provided the tips to hedge fund manager Raj Rajaratnam . According to a new audiotape recording released by federal prosecutors late Friday, Gupta sought to leave the Goldman board to take a job as a senior adviser at Kohlberg Kravis Roberts , the private equity firm led by Henry R Kravis , a friend of Gupta's.
The recording suggests that Gupta may have had personal troubles at the time he was accused of passing the tips. The tape offers an unusual window into Gupta's world during the time that the government says he tipped off Rajaratnam. The case is being zealously tracked by corporate America's top echelon because of Gupta's deep connections at the highest levels: he ran McKinsey & Company, the prestigious consulting firm, for a decade and served on several prominent boards, including that of Procter & Gamble and AMR, the parent company of American Airlines.
On September 9, 2008, Gupta submitted a formal resignation letter to Goldman, a person briefed on the recording said, speaking on the condition of anonymity because the letter was intended to be private. But the firm's executives, including its chief, Lloyd C Blankfein, persuaded him to stay on the board because they thought it would send the markets a bad message to have a director resign as a financial crisis was unfolding. Two weeks later, the Securities and Exchange Commission contends, Gupta told Rajaratnam about Berkshire Hathaway's $5-billion investment in Goldman before it was publicly announced the next day.
The SEC also says Gupta swapped confidential Goldman information with Rajaratnam on two other occassions in 2008. In each case, Rajaratnam traded illegally on the tips, the SEC says. A lawyer for Gupta has denied the charges. Federal prosecutors have said that Gupta is a co-conspirator , but he has not been charged. Gupta ultimately did not stand for re-election to Goldman's board and stepped down when his term ended in May 2010. The news of Gupta's resignation letter was hinted at in the audiotape of a telephone conversation on August 15, 2008, between Rajaratnam and Anil Kumar, both friends of Gupta.
Tuesday, March 15, 2011
Former Goldman director Rajat Gupta sought to quit company in Mid 2008
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