Former Goldman Sachs board member Rajat Gupta, the biggest target of a US government blitz on insider trading, was sentenced to two years in prison on Wednesday, far less than what prosecutors had demanded.
US District Judge Jed Rakoff in New York cited Gupta’s “extraordinary” contribution to humanitarian and educational causes during his climb to the pinnacle of the US business world as the reason for rejecting the 10 year sentence sought by prosecutors.
However, he also turned down a defense request for a lesser, community service punishment that attorneys suggested could have been carried out by helping the poor in Rwanda.
Senior executives committing insider trading “must be made to understand that when you get caught, you will go to jail,” Rakoff said.
Gupta, 63, must also pay a US$5 million fine and was ordered to turn himself in on Jan. 8.
An Indian-born high-flier, whose wife, daughters and other members of his extended family sat behind him in the courtroom, was solemn, but showed no emotion as he heard his fate.
A few minutes earlier, he had told the court that the case was “the most challenging of my life since I lost my parents as a teenager.”
“I’ve lost the reputation that I’ve built for a lifetime,” he said.
“I regret terribly the impact of this matter on my family, my friends and the institutions that are dear to me,” he said.
Gupta was convicted in June of spilling boardroom secrets to his friend Raj Rajaratnam, the former Galleon hedge fund tycoon who was sentenced last year to 11 years in prison for his role at the center of an insider trading ring.
In addition to his spot on the Goldman Sachs board, Gupta had been head of the renowned consultancy McKinsey & Co, and a director of Procter & Gamble, making him one of the most successful Indian immigrants in the US.
Rakoff said that Gupta, a major philanthropist who has been a leader in fighting malaria in Africa and in helping disadvantaged youths, “deserves credit.”
The federal judge said that several jurors cried as they delivered their guilty verdict “because they recognized this was a person with some very good attributes.”
However, Gupta’s feeding of secret business information about Goldman Sachs to Rajaratnam at the height of the 2008 Wall Street financial crisis was “disgusting” and the “equivalent of stabbing Goldman in the back.”
The corrosive effect of insider trading, Rakoff said, “is to place in jeopardy the value of the marketplace, which is one of the most valuable assets the country possesses.”
At the FBI, Acting Assistant Director in Charge Mary Galligan said that Gupta’s disgrace was a warning to others.
“He broke the law. That is what he has to answer for today,” she said.
“The sentence imposed should send a clear message: Providing a tip to a friend, when the tip is insider information, has consequences,” she added.