From The New York Times:
Just a few years ago, Raj Rajaratnam and Rajat Gupta were two of the most admired business luminaries from the “twice blessed” generation of South Asian immigrants. Both were born after India achieved independence from Britain in 1947, and both came to the United States after the Hart-Celler Act of 1965 abolished national origin quotas. Like many top students at the time, they sought graduate business degrees: Rajaratnam at the Wharton School, Gupta at Harvard. Rajaratnam founded the Galleon Group hedge fund and became a billionaire, and was considered the richest Sri Lankan-born person in the world. Gupta rose within McKinsey & Company to become the elite consulting firm’s three-term leader and the first Indian-born chief executive of a multinational company. Both were rich and reputable, traveling in the most exclusive social and business circles. Rajaratnam was dedicated to helping victims of land mines; Gupta presided over global efforts to fight AIDS, tuberculosis and malaria.
Needless to say, neither of these men needed to engage in insider trading.
And yet (spoiler alert for anyone who hasn’t read the business pages since 2011), in separate trials, juries convicted each of multiple counts of securities fraud. Investigators discovered that Rajaratnam had been given insider tips and used this advantage to make millions of dollars trading shares. Gupta was one of his sources. Rajaratnam received an 11-year sentence, the longest in American insider trading history; Gupta got two years. In one particularly dramatic instance, Gupta, on a conference call with Goldman Sachs’s board of directors one week after the collapse of Lehman Brothers, in 2008, learned that Warren Buffett was prepared to support Goldman with a $5 billion investment. Within minutes, Gupta called Rajaratnam and Galleon purchased nearly $25 million of Goldman stock, mostly for Rajaratnam’s portfolio. The following month, when Gupta learned Goldman was about to report a loss, he called Rajaratnam 23 seconds later. Galleon soon began dumping Goldman stock.