Begin Reading
Table of Contents
Newsletters
Copyright Page
In accordance with the U.S. Copyright Act of 1976, the scanning, uploading, and electronic sharing of any part of this book without the permission of the publisher constitute unlawful piracy and theft of the author’s intellectual property. If you would like to use material from the book (other than for review purposes), prior written permission must be obtained by contacting the publisher at [email protected]. Thank you for your support of the author’s rights.
To my loving parents
for making their journey
Brightest and best of the sons of the morning,
Dawn on our darkness and lend us Thine aid.
—Opening line from an epiphany hymn
by the Right Reverend Reginald Heber,
Anglican bishop of Calcutta, 1823–1826
Cast of Characters
In September 2009, as Wall Street recovered from the worst financial crisis since the Great Depression, an insider trading case was brewing…
The Leading Actors
The Guptas
Rajat K. Gupta—former three-time head of McKinsey and board member for Goldman Sachs, Procter & Gamble, and AMR
Anita Mattoo Gupta—his wife
Geetanjali, Megha, Aditi, and Deepali Gupta—his daughters
Ashwini and Pran Kumari Gupta—his parents
Kanchan Gupta—his younger brother
Jayashree Chowdhury—his younger sister
His Lawyers
Kramer Levin Naftalis & Frankel
Gary P. Naftalis—Gupta’s lead counsel; a former federal prosecutor turned A-list criminal defense attorney who has represented everyone from former Walt Disney CEO Michael Eisner to Wall Street legend Kenneth Langone
David S. Frankel—longtime litigation partner of Naftalis, who represented New York State Liberal Party leader Raymond Harding in an inquiry by New York attorney general Andrew Cuomo
Robin Wilcox
Alan R. Friedman
The Kumars
Anil Kumar—McKinsey consultant who was Raj Rajaratnam’s classmate at Wharton and Gupta’s protégé at McKinsey
Malvika Kumar—his wife
Aman Kumar—his son
His Lawyers
Morvillo Abramowitz Grand Iason & Anello
Robert G. Morvillo—Kumar’s lead counsel; he represented domestic goddess Martha Stewart
Gregory Morvillo—his son, who after his father’s death would start his own firm and represent Level Global cofounder Anthony Chiasson
The Rajaratnams
Raj Rajaratnam—head of the Galleon Group
Asha Pabla Rajaratnam—his wife
Rengan Rajaratnam—former head of Sedna Capital and Raj’s youngest brother
Ragakanthan Rajaratnam—Galleon portfolio manager and Raj’s middle brother
His Lawyers
Akin Gump Strauss Hauer & Feld
John M. Dowd—Rajaratnam’s lead counsel; a feisty ex-marine who also served as special counsel to three commissioners of Major League Baseball in the investigation of Pete Rose and others
Terence J. Lynam
Samidh Guha
Patricia A. Millett
The Sheriffs of Wall Street
The Securities and Exchange Commission
George S. Canellos—director, New York office
David A. Markowitz—former assistant regional director, New York office
Sanjay Wadhwa—assistant regional director, New York office
Jason E. Friedman—senior staff attorney
John P. Henderson—senior staff attorney
The FBI
B. J. Kang—special agent who was one of the arresting agents of Bernie Madoff and also worked the Galleon case
The US Attorney’s Office, New York
Preetinder S. Bharara—US attorney, Southern District of New York
Reed Brodsky—assistant US attorney
Andrew Z. Michaelson—special assistant US attorney on loan from the SEC
Jonathan R. Streeter—assistant US attorney
The Galleon Circle
The Galleon Group
Michael Cardillo—portfolio manager
Kris Chellam—former Xilinx executive turned Galleon portfolio manager
Caryn Eisenberg—Rajaratnam’s executive assistant
Tom Fernandez—Rajaratnam’s Wharton classmate and head of investor relations
Michael Fisherman—analyst
Ian Horowitz—trader
David Lau—Rajaratnam’s Wharton classmate and Asia chief
George Lau—chief compliance officer
Ananth Muniyappa—trader
Gary Rosenbach—portfolio manager
Richard Schutte—chief operating officer
Leon Shaulov—portfolio manager
Adam Smith—Harvard Business School graduate, former Morgan Stanley investment banker, and portfolio manager at Galleon
Other Traders
William J. Lyons III—former Sedna trader with a weakness for instant messaging
Matt Read—Lyons’s cousin and instant-message partner
Frank “Quint” Slattery—manager of Symmetry Peak Capital
Around the Galleon Ring
Sunil Bhalla—Polycom executive
Danielle Chiesi—New Castle Funds consultant
Rajive Dhar—executive at Arris Group
Rajiv Goel—Wharton classmate of Raj Rajaratnam and Intel Treasury executive
Shammara Hussain—former investor relations associate at Market Street Partners
Roomy Khan—former Intel marketing employee and former Galleon trader
Deep Shah—credit analyst at Moody’s Investors Service
Apjit Walia—RBC Capital Markets analyst
Goldman Sachs
Lloyd C. Blankfein—chief executive
Gary D. Cohn—president
John H. Bryan—board member
William W. George—board member
Gregory K. Palm—general counsel
Steven R. Peikin—Goldman’s outside lawyer at Sullivan & Cromwell
John F. W. Rogers—Blankfein’s chief of staff and secretary to the Goldman board
Byron D. Trott—Warren E. Buffett’s banker
David A. Viniar—chief financial officer
Jon Winkelried—former president
McKinsey
Dominic Barton—managing director
Marvin Bower—former managing director (1950–1967)
D. Ronald Daniel—former managing director (1976–1988)
Ian Davis—former managing director (2003–2009)
Frederick W. Gluck—former managing director (1988–1994)
Herbert Henzler—former chairman of McKinsey Germany
David Palecek—McKinsey consultant
Anupam “Tino” Puri—former managing director of McKinsey
India
Paresh Vaish—former engagement manager on Hindustan Motors project
Donald C. Waite III—former head of McKinsey’s New York office
Adil Zainulbhai—chairman of McKinsey India
Harvard Business School
Walter J. Salmon—Gupta’s professor
John V. Carberry—Gupta’s suite mate
David Manly—Gupta’s late friend
Prologue
The Twice Blessed
It was Tuesday, November 24, 2009, and Rajat Kumar Gupta was
headed to the White House for the first state dinner hosted by President Barack Obama and his wife, Michelle, the most glamorous political couple since the Kennedys. Six years had passed since Gupta had stepped down as the three-term global managing director of consulting giant McKinsey & Co., but at sixty, he was busier than ever. He sat on a handful of corporate boards—Goldman Sachs & Co., Procter & Gamble Co., and American Airlines, to name a few. His wife, Anita, had hoped his retirement from the top job at McKinsey would slow him down, but he was in the throes of building his own private equity company from scratch. Jetting from continent to continent, living out of a suitcase, he was as intent on being a game changer in private equity and philanthropy as he had been during a storied career in consulting.
Dressed in a black Nehru suit, with a red handkerchief tucked in his pocket, Gupta made his way to the white tent on the South Lawn from the gilded East Room, which served as the staging area for the dinner. At every turn, he ran into friends. He chatted with Deepak Chopra, the new age physician, who was wearing his signature gem-studded eyeglasses for the glittering gala. He mingled with Preeta Bansal, a top lawyer in the new administration, and caught up with Bobby Jindal, a former McKinsey consultant and now the Republican governor of Louisiana. Jindal, whose given name is Piyush, was born in Baton Rouge; his parents migrated to America from the Indian state of Punjab six months before he was born.
Jindal was typical of the guests at the White House that night. While the ostensible purpose of the evening was to honor the Indian prime minister, Dr. Manmohan Singh, the event also served as a barometer for how far and how fast an immigrant group had risen. In one generation Indian-Americans had vaulted from geeky outsiders to polished players in all facets of American society.
If Gupta wanted to make small talk in the security line with a Fortune 500 CEO, he could approach either GE’s Jeffrey Immelt or Indra Nooyi, the CEO of PepsiCo, who was born and bred in Chennai. If he wanted to bask in the reflected glow of a TV presenter, he could chat with Katie Couric or the Mumbai-born Fareed Zakaria. Hollywood was represented at the event. Both Steven Spielberg and the Indian director of The Sixth Sense, M. Night Shyamalan, whose birthplace is Pondicherry, were in attendance that night.
As one of the pioneering Indian success stories in the United States, Gupta knew almost all the Indian invitees and, as a McKinsey legend, their non-Indian counterparts too. He had worked with many and served as a mentor to others. When Neal Kumar Katyal, the principal deputy solicitor general, was in high school and getting pressure from his Indian parents to study medicine, Gupta advised him to follow his dreams. Katyal’s position in the Justice Department as one of the chief attorneys representing the government before the US Supreme Court was a testament to the heights to which Indians had risen in American society.
“As you looked around the room that night, it was breathtaking to see the diversity and depth of talent,” says Timothy J. Roemer, at the time the US ambassador to India. “There were CEOs and entrepreneurs, there were doctors, hotel owners, and writers. There were aspiring office seekers and office holders. There were people who had grown up poor in India but now they were the CEO of the company. You could feel how alive the American dream was in that room,” exults Roemer.
Gupta and the other Indian-American luminaries were either part of or the children of a generation that academic Vijay Prashad has dubbed the “twice blessed.” The first blessing was to be born after India had achieved its independence from Great Britain at the stroke of midnight on August 15, 1947. The blessing of this freedom was not just political; it was cultural too. The end of the Raj made educational and social advancement possible to a young nation throbbing with 340 million people.
The second blessing was the culmination of the civil rights struggle in the United States and the passing in 1965 of the now largely overlooked Hart-Cellar Act into law. The act—an outward-looking follow-up to the 1964 Civil Rights Act—did away with long-standing isolationist policies that severely restricted Indian immigration to one hundred people each year. Hart-Cellar meant that future immigrants would be allowed into America based on their skills and not just their countries of origin, race, or ancestry. For a generation of Indians weaned on a strict diet of education, it was a momentous breakthrough with far-reaching implications.
In the wake of the act, Indian immigration into America grew from a trickle to a torrent. Unlike the previous waves of huddled masses who took several generations to make their way from digging ditches to holding office in the statehouse, Indian immigrants were highly educated and brimming with ambition. “There is an immense, immense selectivity in the pattern of Indian migration to the United States,” says Professor Marcelo M. Suarez-Orozco, an expert on immigration and dean of UCLA’s Graduate School of Education and Information Studies. The average Indian in the United States is “ten thousand times more likely to have a doctorate” than the average Indian in India. In other words, the Indians who come to America are by and large the country’s “brightest and best,” an observation borne out even today by hard facts.
Of the 3.2 million Indians in the United States, 70 percent have bachelor’s degrees compared to just 28 percent nationally. Their median annual household income of $88,000 is almost twice what most Americans earn each year and 33 percent higher than the average income of Asians in the United States. Most of the overachievers are immigrants. In the new millennium, Gupta and other Indian-born natives were ubiquitous in every sphere of American life. They were among the country’s most promising doctors and engineers and its most successful bankers and lawyers. Some ran or were poised to run the nation’s biggest corporations—Citigroup and MasterCard. Others were contenders for top jobs at all-American companies like Warren Buffett’s Berkshire Hathaway.
None of this would have been possible had it not been for the path staked out by the likes of Rajat Kumar Gupta. He was the most accomplished representative of an entire generation of strivers. He cleared an eight-thousand-mile path to the United States for hardworking Indian émigrés. Through his exemplary career—and without ever consciously choosing to do so—he broke down America’s prejudicial business barriers and served as a model not only for his peers but for their sons and daughters too.
In the weeks before the White House dinner, there was much handicapping about who would be asked and whether previous guests to state dinners with Indian prime ministers would be asked again. In the bruising politics of the Beltway, the drop-offs were more widely publicized than the invitees and the absences—the most notable being Citigroup chief Vikram Pandit—talked about in hushed, funereal tones.
There was never any question that Gupta would be invited. He was one of the few Indians in America who waltzed through vastly different worlds, business and philanthropy, in India and America, without ever losing a step. He was friends with almost all the Indian businessmen accompanying Dr. Singh on his trip to the United States. He was close to Mukesh Ambani, the head of the powerful Indian conglomerate Reliance Industries, who viewed Gupta as one of India’s most treasured exports, someone who had reached the pinnacle of corporate and public life in the United States but had never lost his affection for his homeland. He knew Ratan Tata, often described as the David Rockefeller of India. Tata, whose holdings run the gamut from cars—Jaguar Land Rover—to hotels—Mumbai’s iconic Taj Mahal Palace hotel—had worked early on to help Gupta turn his dream of an Indian business school into reality.
But Gupta’s most important relationship—one that certainly helped secure an invitation that evening—was his friendship with the guest of honor, Dr. Singh. Gupta was one of the few Indian executives in America who could get the Indian prime minister on the phone on short notice. Despite McKinsey’s prominence in India, the two were not acquainted in the early 1990s when Gupta was a rising star at McKinsey, and Singh, then a little-known finance minister in a previous Indian government, was the architect of a fusillade of economic reforms that dismantled the Red Tape Raj and ushered in an era of entrepren
eurial freedom. But when India prospered in the wake of Singh’s moves, McKinsey thrived, advising a raft of Indian companies on restructuring moves and playing a pivotal role in building “Offshore-istan.”
It was during Gupta’s time as managing director that McKinsey opened its groundbreaking “Knowledge Center” in a suburb of New Delhi, hiring a fleet of Indian researchers, many with MBAs, to analyze important trends such as cellular phone penetration for McKinsey consultants.
When the McKinsey Knowledge Center turned out to be a huge hit, Gupta went global with the idea. He preached the sermon of offshoring to American companies eager to cut costs and pushed them to send more and more of their back-office and support work—corporate research, legal transcription, and financial analysis—to India. Clients were thrilled, and in India, Gupta was a corporate rock star, just as recognizable in Mumbai as Jamie Dimon is in New York.
It was no small irony, then, that one of his dinner companions at the White House that evening was labor leader Andy Stern, the president of the country’s second-largest union (the Service Employees International Union). Stern, whose organization spent the most money supporting Obama, sat between Gupta and his wife, Anita, at a table sumptuously decorated with gold charger plates and purple and magenta arrangements of roses, sweet peas, and hydrangeas on green-apple tablecloths. Over a dinner of green curry prawns, collard greens, and coconut-aged basmati rice, Stern took the opportunity to nudge a key party some consider responsible for the fading prospects of the American worker. He pressed Gupta on why companies like Goldman, whose investors include public pension plans, didn’t have more regard for the worker. In his soft-spoken but firm way, Gupta insisted they did. They gave a lot of money away to needy organizations. But Stern had something more radical in mind—profits more broadly distributed to rank-and-file employees.
The Billionaire's Apprentice: The Rise of the Indian-American Elite and the Fall of the Galleon Hedge Fund Page 1