Wall Street in the Dock
The insider-trading scandal that involves the most respected names in business is shaking up the financial world. Who stands to lose the most in the $45 million fraud trial of Raj Rajaratnam?
--stands to lose powerful friends and worldly influence. Few climbed higher than Gupta, the former managing director of consulting powerhouse McKinsey & Co. As a Goldman board member, Gupta, 62, is said to have phoned hedge-fund baron Raj Rajaratnam right after a crucial board meeting during the financial meltdown to tell his pal that Warren Buffett was supplying $5 billion to prop up the bank. Rajaratnam's fund netted $900,000 overnight thanks to the tip. The SEC has filed a civil suit, though Gupta says he's done nothing wrong.
--stands to lose a national hero. Born and schooled in India, Gupta was widely celebrated in his home country, where he established a new business school in 2001 and has had the ear of Prime Minister Manmohan Singh. An admirer once compared Gupta to the philosopher and priest Thomas Aquinas. "It's a bit of a disappointment when one of your heroes has fallen," a former chief executive of Procter & Gamble India told the Financial Times. Those watching the trial from the subcontinent and looking for a local hero might root for Preet Bharara, the Indian-born U.S. attorney who is prosecuting the case.
--stands to lose more of its reputation. The insider-trading allegation becomes yet another obstacle for Goldman Sachs, which is trying to return to top form. CEO Lloyd Blankfein, who once lightheartedly described Goldman's mission as doing "God's work," is set to testify at the trial. Last year, Goldman paid $550 million in fines to the SEC to settle claims that the firm misled investors. The bank must now confront allegations that its elite boardroom was home to leaked information and illegal activity. …