Tuesday, November 06, 2012

Perspective in an India Newspaper on the Rajat Gupta Case

Shankar Sharma, Rajat Gupta - Less equal than others, He was given a prison sentence for purveying insider information, while Hank Paulson got off scot-free for doing the same, Business Standard (Nov. 6. 2012)

"As it should be clear by now, America exemplifies crony capitalism, and protects its own. And, contrary to what Indians would like to believe, Rajat Gupta was hardly part of the 'rich and powerful' set. In fact, he was really a nobody in the American context. Just another former CEO of a consulting firm. That’s hardly a ticket to stardom. He was an Indian idol, not an American one. In fact, that was precisely Gupta’s problem: that he didn’t belong to the echelons of the high and the mighty and desperately wanted to belong to that club (this is revealed in Raj Rajaratnam’s transcripts), for which he was currying favours for Rajaratnam, much like the young Bud Fox supplying the Blue Star Airlines tip to Gordon Gekko in Wall Street.

"This brings me to the American criminal justice system. It is hardly a justice system at all. Given that nearly 90 per cent of cases never go to trial, having been plea-bargained and settled beforehand, the courts have largely become rubber stamps of settlements between parties. This rids a court of its primary purpose: the discovery of truth and the establishment of case law. And, of course, given that hearsay evidence is admissible in US courts, prosecutors and federal agents get a free run in threatening lower level employees to rat against their seniors, to win immunity. So, while it is illegal for a normal citizen to induce or bribe somebody to give false evidence, it is perfectly legal for the government to do so.

"This apart, when the Feds can’t get you on the substantive charge, they always have the favoured fall-back option 'obstruction of justice' or 'false statement' charge. They got Quattrone on the first. They got Martha Stewart on the second (because Stewart told investors that she was confident no charge could be brought against her in the ImClone share sale case — this was taken by the prosecutors as an attempt to lie to and mislead the public. As it turned out, Stewart didn’t go to jail on the insider trading charge at all). If giving a better-than-real picture of a company’s health is a criminal offence, as was held in the case of Stewart, it puzzles me no end why none of the Wall Street bank CEOs are behind bars, for they constantly told the public every quarter during the sub-prime crisis that the 'worst was behind them', and that they expected no more write-downs. As the story goes, Stewart was not exactly buddy-buddy with the Bush administration…

"Another interesting and unnoticed fact about the Gupta trial was that the judge prevented the defence from presenting voluminous evidence to prove his innocence, saying, 'Keep this short… the jury doesn’t have that much time to go into all this pile of evidence.' Such a thing would be unthinkable in Indian courts, where even if a judge is biased against the defendant, he will give him any amount of time to mount a credible, comprehensive defence.

"Let us disabuse ourselves of the notion that the West is all about rule of law. US laws protect the truly rich and powerful, (a few outliers like Enron and Worldcom have to be put away, just to keep the pretence alive… but so have we, like in the case of Satyam) and selectively target small fry like Gupta. It’s also convenient that these are Indians and South Asians. There is a pattern here (and I include Vikram Pandit in this pattern), and the truly perceptive will see what the pattern is."


Shankar Sharma is Vice-Chairman and Joint Managing Director, First Global.

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