Inside(r) Story

There have been many newspa- per accounts of the largest insider trading scandal in US history and the role of Rajat Gupta, the India-born former head of McKinsey & Co, in it. It occurred at a time when the world was reeling under a financial crisis. Sandipan Deb, an IIT/IIM alumnus and a former journalist, has neatly stitched together the story, making it read like racy fiction.

Deb’s Fallen Angel is one of the first books to provide comprehensive coverage of the scandal, which culminated in Gupta being sentenced to two years’imprisonment on October 24 last year. During the trial, the question in everybody’s mind was whether Gupta, who had built an impeccable reputation in his corporate career, was, indeed, guilty. Or, considering the prosecution used only circumstantial evidence to nail him, was he plain unlucky?

The book does not take a position. It leaves the reader to decide for herself. Based on an earlier meeting with Gupta, Deb records his impressions of the man: “Rajat Gupta… was the man I had found most difficult to fathom... Either he was the perfect guy – highly intelligent, unfailingly courteous, never a hair out of place – or he had built an impregnable wall around himself. I could not get the slightest glimpse of what could lie behind it…”

Those who expect the book to be Gupta’s detailed biography, as the title suggests, will be disappointed. Confronted by major limitations – no access to the subject or his family – Deb has relied on other kinds of research to put together Gupta’s early life, and retrace the steps by which he became the first Indian – indeed the first non-American – to head McKinsey, as well as to evaluate his performance as its head between 1994 and 2003. Deb draws heavily from the US Federal Bureau of Investigation’s wiretap transcripts and court documents to explain the scandal and Gupta’s involvement in it.

The book is neither linear nor chronological in its delivery. Besides looking at Gupta, the scandal is described through the stories of other major players – such as Raj Rajaratnam, the Sri Lanka-born hedge fund trader to whom Gupta was accused of passing on information, Anil Kumar, Gupta’s protégé at McKinsey who chose to cooperate with the authorities to nail both Rajaratnam and Gupta and got away with light punishment in return – as well as smaller players. Though this leads to some repetition, the narrative remains taut.

Insider trading, as Jed S. Rakoff, US district judge who convicted Gupta, said in his judgment, is a crime easy to commit but difficult to catch. The book also reveals the relentless effort of Attorney for Southern District of New York, the India-born Preet Bharara, to nail Rajaratnam and Gupta. Though the evidence against Gupta was circumstantial, Rakoff considered it overwhelming.

Indian regulators have a lot to learn from the scandal and, more importantly, how the authorities went about nailing the accused. This book will help that process.