Gupta Sentenced to Two Years in Prisonby Michael Rothfeld and Dan Strumpf, The WSJ
Former Goldman Sachs Group Inc. director Rajat Gupta was sentenced to two years in federal prison for leaking corporate secrets about the investment bank to a hedge-fund manager at the height of the financial crisis.
The prison term imposed by U.S. District Judge Jed Rakoff in Manhattan was a capstone to the fall of Mr. Gupta, a once-revered business leader who became the most prominent figure caught in the push against insider trading by U.S. prosecutors and the Federal Bureau of Investigation.
"I think the record, which the government really doesn't dispute, bears out that he is a good man," said Judge Rakoff during the hearing. "But the history of this country and the history of the world, I'm afraid, is full of examples of good men who do bad things."
The judge also ordered Mr. Gupta to pay a $5 million fine and said he would face one year of supervised release after finishing his prison term. The defense plans an appeal.
Mr. Gupta, who was accompanied to court by his wife and four daughters, apologized to his friends, family and the charitable institutions that he helped to found. "The last 18 months have been the most challenging period of my life since I lost my parents as a teenager," he told the judge before sentencing. "I lost my reputation that I built over a lifetime.
"Much of the first year seemed surreal to me. However, since the trial I've come to accept the reality of my life going forward," he said.
Mr. Gupta, 63 years old, the former head of McKinsey & Co., the global consulting firm, was implicated in 2010 in the investigation of Raj Rajaratnam, his friend and business associate who headed hedge fund Galleon Group.
He was criminally charged late last year with divulging information about Goldman Sachs and Procter & Gamble Co., where he was also a director, several months after Mr. Rajaratnam was convicted at a trial of insider trading and sentenced to 11 years in prison.
In June, after Mr. Gupta fought the case at trial, a jury found him guilty of three counts of securities fraud and one count of conspiracy for giving Mr. Rajaratnam tips about Goldman during the financial crisis, sometimes just moments after he learned them, including that Berkshire Hathaway Inc. would invest $5 billion in the bank in 2008.
Mr. Rajaratnam used the tips to earn millions of dollars for Galleon, prosecutors said, though Mr. Gupta didn't trade on them himself or profit directly at all. Mr. Gupta was acquitted of two securities-fraud charges.
Prosecutors had argued that Mr. Gupta should receive up to 10 years in prison under the federal sentencing guidelines, which in insider-trading cases are largely based on profits, or losses avoided, because of the illegal tips. But the guidelines are advisory and Judge Rakoff often sentences below them.
Judge Rakoff received letters of support for Mr. Gupta from hundreds of prominent supporters, including Microsoft Corp. founder Bill Gates, the Indian doctor Deepak Chopra, and former United Nations leader Kofi Annan, not to mention Mr. Gupta's wife, four daughters, and scores of other relatives and friends.
Their contentions that Mr. Gupta deserved leniency because he had lived an otherwise impeccable life and given many years to health care, poverty, education and other philanthropic causes, were set against the legal requirement that a judge issue a sentence that will discourage others from similar crimes.
Manhattan U.S. Attorney Preet Bharara said in an emailed statement: "With today's sentence, Rajat Gupta now must face the grave consequences of his crime—a term of imprisonment. His conduct has forever tarnished a once-sterling reputation that took years to cultivate. We hope that others who might consider breaking the securities laws will take heed from this sad occasion and choose not to follow in Mr. Gupta's footsteps."