Former Goldman Sachs and Procter & Gamble board member Rajat Gupta arrives at Manhattan Federal courthouse for the closing arguments of his trial in New York, June 13, 2012.

Story highlights

India's business elite struggling to come to terms with the downfall of Rajat Gupt

Former head of McKinsey & Co and director at Goldman Sachs convicted of insider trading

Financial Times  — 

India’s business elite is still struggling to come to terms with the downfall of one of their most celebrated members, following the conviction of Rajat Gupta on charges of insider trading in a court in New York on Friday.

The former head of McKinsey & Co and director at Goldman Sachs was once the pre-eminent member of India’s “Davos set”, with an ability to open doors at the highest level of global business, matched only by a reputation for personal integrity and charitable good works.

While many expected the verdict, the conviction of the Indian American on charges of conspiracy and securities fraud after a four-week trial, led some to express feelings of sadness and shame, while others admitted that the trial had damaged the international image of Indian commerce.

“The devastating part of this is that Rajat was a hero and a role model to many of us, in terms of his success and his conduct,” says Jayant Sinha, managing director of Omidyar Network India Advisors, an investment group, and a former colleague of Mr Gupta at McKinsey. “So to see this happen, it is just really heartbreaking.”

Mr Gupta was found guilty on several counts of passing on secret business information relating to trades in the stock of Goldman Sachs to Raj Rajaratnam, the head of Galleon, a hedge fund. Mr Gupta, who will be sentenced in October, faces several years in prison, although his lawyers have said that they will appeal the verdict.

Before his trial, Mr Gupta’s rise from a modest middle-class background was often cited as a model of a modern meritocratic Indian career path.

Orphaned in his teens and having left India after his undergraduate degree at the prestigious Indian Institute of Technology in New Delhi, he studied at Harvard Business School and went on to be commonly cited as the first Indian head of a global company.

His positions at Goldman Sachs and McKinsey, where he became worldwide head in 1994, around the same that India’s economy had begun to liberalise and open up to foreign investment, made him a powerful gatekeeper for business tycoons beginning to seek connections abroad.

During the trial many leading industrialists backed a public campaign supporting Mr Gupta and casting doubt on the evidence against him, including Mukesh Ambani, the billionaire head of Reliance Industries and Adi Godrej, chairman of the Godrej Group.

Mr Ambani also published an open letter, in which he expressed admiration for Mr Gupta’s philanthropic endeavours, which included a prominent role in setting up the Indian School of Business, an elite western-style management school founded in Hyderabad in 1999. “I respect Rajat for his selfless dedication and humility and he will always be a friend of mine,” he wrote.

But while the tone of much of the reaction to the verdict has been marked by quiet regret others have been more critical, both of Mr Gupta’s conduct and more broadly of the manner in which India’s business elite rallied to his defence.

“What he [Gupta] did was entirely about greed and avarice”, says Suhel Seth, managing partner of Counselage, a New Delhi-based marketing consultancy. “But he is still being supported by these people because ultimately everything about India is all about a cosy club. If one of your club members gets caught you have to rally round. Or you are seen to be unpatriotic, or not part of the club.”

Gurcharan Das, an author of books on the Indian economy and former chief executive of the Indian operations of Procter & Gamble, said that the saga suggested that Mr Gupta, while associating with billionaires, aspired to become one of them.

“It’s the classic problem of status anxiety. It’s what we all suffer from in some form,” said Mr Das, who is the author most recently of The Difficulty of Being Good, a book that draws on the philosophical lessons of the Hindu epic, the Mahabharata.

“As head of McKinsey he was associating with CEOs and billionaires earning very large sums. His job was to advise people with a lot of capital, not to be an owner of capital. He got new ambitions.”

Mr Das also highlighted the “glaring” contrast between an erratic and slow-moving Indian legal system that often protects the well-connected, and the swift and harsh punishment handed out by the powerful US courts. “We sometimes catch [people] but we don’t convict,” he said. “What the US system is saying is that no one is above the law.”