Rajat Gupta's remarkable rise and inexplicable fall

Rajat Gupta, an important man with exemplary personal qualities, falls to disaster because of a combination of a personal failing and circumstances with which he cannot deal, says Jay Bhattacharjee.

When the Federal Court in New York finally pronounced its sentence on the 24th October, the Indian broadsheets had gone to bed – at least the major ones.

Therefore, the portentous outpourings of the desi hacks on the issue had to wait for the next morning. And when it came, it was quite a deluge.

Admittedly, observers of the saga, worldwide, had a fair amount of time since Gupta's original conviction in June, to do their homework on the entire affair, and the international press was, therefore, well equipped to come up with reasoned overviews.

In our shores, there was an extra load to carry. Almost every industrial leader of some standing, and his dog, was drummed up to say something.

In addition, there was the frenetic rush to interview ex-IIT types and contemporaries from Gupta's old school in central Delhi.

Overall, there was fairly good copy and everyone in Bahadurshah Zafar Marg, Delhi's Fleet Street, must have gone home tired but happy.

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Jay Bhattacharjee is a business-corporate analyst and political observer

On a closer look, the effort, in many cases, seemed distinctly schmaltzy. The local hacks had gone overboard by referring to the "Greek tragedy" aspects of the affair.

Clearly, Rajat's defence attorney, Gary Naftalis, a veteran of many Wall Street legal battles, was the original culprit.

When he said that "this is a fall from grace of Greek tragedy proportions", the old legal eagle jumbled a number of metaphors and created a messy melange. He was definitely having a bad hair day, since his statement sounded terribly gauche. The local hacks never hesitated to pick up the refrain.

Why is there a disconnect here? Is this really a modern day version of a Greek tragedy or are we looking at parallels much too glibly and conveniently? 

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There is certainly a temptation here, and not just in the Fourth Estate, to elevate this matter to a level that is much grander and classical.

After all, here is a relatively impoverished son of a freedom fighter (who suffered brutal treatment at the hands of the occupying British imperialists) who is sadly orphaned when he is barely in his teens.

He does brilliantly in his academics and manages to go to Harvard on a scholarship, a feat that millions of others would give their right and left arms to emulate. 

Post Harvard, he enters a very WASP organisation and, through sheer grit and performance, breaks through the glass ceiling to become the global chief executive within 21 years of joining the firm. 

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He heads the firm with distinction, leading it to newer pastures, especially in his motherland and in other developing countries.

His charisma is such that he is soon supping with global CEOs, American Presidents and United Nations Secretary Generals.

All his contacts are impressed by his manifest qualities and many of them become personal friends. 

Throughout his relentless rise in the corporate and professional world, he is always ready to extend a helping hand to old friends, comrades, family members and others less fortunate than him. His fan club is enormous and eclectic.

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The man's persona, too, is exemplary, since there is no recorded incident ever of Rajat Gupta behaving other than impeccably.

He also builds up a reasonable personal kitty (estimated to be anywhere between one hundred million dollars to one hundred seventy five million dollars (that is of the Uncle Sam variety).

This personal net-worth is absolutely kosher and beyond reproach. Then, in 2003, he steps down as the CEO of McKinsey and embarks on a career as an independent consultant and advisor.

Undoubtedly, he leverages the different networks he has built up assiduously in the previous thirty odd years.

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He walks not just in the corridors of power but in the core of the power centres. His Directorships of Goldman Sachs and Procter & Gamble don't really seem all that grand in the context what he had already achieved.

During the way, he met his nemesis, a Sri Lankan Tamil hustler, Raj Rajaratnam, (described as a 'snake in the grass" by the jury that convicted Gupta) who was running a medium-sized hedge fund on Wall Street. That was the beginning of the end of the Bengali bhadralog.

Because when he stepped out of the Goldman Sachs board room on the afternoon of the 23 September 2008 a little after 3 p.m. to make the phone call to Rajaratnam to tell him of Warren Buffet's impending investment of $5 billion in Goldmans, Rajat Gupta effectively signed his exile from public life and the business world.

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The Feds had put a wire tap on Rajaratnam and Gupta's suicidal and self-incriminating call was recorded for posterity.

The point is that this is much too banal to qualify as a Greek tragedy. There is nothing comparable to the flight of Icarus near the sun, nor of Zhivago's extensive self-analysis or the epic introspections of Malraux's protagonists in "Man's Fate".

The essence of Greek tragedy is that the protagonist, an important man with exemplary personal qualities, falls to disaster because of a combination of a personal failing and circumstances with which he cannot deal.

He also wages an intense mental struggle when he confronts his choices. Rajat qualifies on one count only, that of personal failing.

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The circumstances were clearly within his control and there is also no evidence that he went through any mental struggle before he opted for his course of action.

This entire saga is a commonplace one of greed and mendacity, two qualities that so plague modern public lives, whether in the corporate world or in politics. Let's leave classical Greece out of this.

It is not possible to believe that a Harvard MBA, a CEO of McKinsey and the founder of the Indian Business School (ISB) would not know the meaning of fiduciary responsibility of a Board member of a listed company.

This entire notion of a relationship of trust is something that is at the core of business ethics and corporate laws. Business Law 101 in any MBA course, surely.

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Rajat Gupta's defence is that he did not make any personal gain from the tip he gave Rajaratnam; the US government's case is that this was possibly a quid pro quo for future largesse to Gupta from Rajaratnam. 

It is only fair to add that Gupta intends to appeal his very conviction at the appropriate American legal forum and he has not exhausted his legal remedies by any means.

There is a caveat that I must add at this stage. I knew Rajat between the years of 1968 to 1970 and there hangs a tale. I had joined IIT Delhi as a Lecturer in Economics after returning to India from Cambridge.

I was wet behind my years and had all the assorted ideas that a man of 22 has in his very first job. And what a job ! Teaching some of the brightest minds in the country, and in the world, although the IITs had not projected themselves on the global scene at that time and comparisons were difficult to come by.

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Rajat, as a 3rd year mechanical engineering student, took my compulsory Economics course in 1968.

It was an amazingly bright lot that I had to contend with; Rajat was very much among the brightest ones, but to say that I spotted in him a future McKinsey CEO would be pulling a fast one.

His shy dignity, however, was not difficult to spot. A lone scholar, not much given to extravagant socialising. 

In spring 1970 when he was in his 4th year, he acted in a play that, in a fit of eccentricity, I directed for the Institute festival. I must confess I had no directorial or theatrical skills whatsoever.

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The play was a work of subdued genius by Boris Vian, titled "The General's Tea Party". Rajat was one of the generals, a key role, and he carried it off with aplomb. Again, understated talent, a lot of introspection, dignity and thoroughness.  

This was when we interacted quite a lot – again in a group. The age difference between yours truly and his "students" was barely 2 – 3 years and this made the interaction all that more enjoyable.

In August 1970, I left the IIT to join the corporate world, and that was the last that I met him.

Periodically, his old classmates, who were in touch with me, would tell me about his meteoric rise in McKinsey, until he made headlines in March 1994, when he was appointed to the top slot in McKinsey and even the New York Times was forced to sit up and take notice.

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Move over Amartya Sen and Amar Bose and the researchers in Silicon Valley – this was a development that middle America watched.

This was very much a mainstream event, a firm that was a household name would have an exotic person at its helm. 

Fast forwarding to the first decade of the millennium, there were disquieting whispers about one of Rajat's ventures in these shores, the Public Health Foundation of India and how there was no accounting of the Rs100 crore (Rs 1 billion) of direct funding it received from the Government of India.

The planned Indian Institute of Public Health campus in Punjab suffered a set-back when the Supreme Court set aside the acquisition of land at the project site by the state government.

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The other concerns expressed about Rajat related to his private equity fund, the New Silk Route Partners (NSR), which has Abdul Hafeez Shaikh, Pakistan's former finance minister, as a founding General Partner, and substantial investments in our western neighbour.

Gupta also played a questionable role in the acquisition of an Indian banking licence by a not-so-squeaky-clean Russian bank.

Therefore, it is not easy to brush aside the charges brought by the SEC and the American government against the wunderkind Rajat. Charges that have convinced a jury of 11 "true and honest citizens" to return a guilty verdict against him.

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Finally, it boils down to how a person's character evolves. Genetics, history, law and regulations all bend before this rule.

And there is no better summary than what the arch-colonialist and imperialist Kipling, who also happened to be a fine poet and a keen observer of human frailties, wrote:

If you can walk with kings and keep a common touch
If all men count with you but none too much
Yours is the earth and everything that's in it
Which is more, you will be a man, my son

The writer is a business-corporate analyst and political observer.