The Goldman Sachs Mafia Gets Revenge
by David Atkins ("thereisnospoon")
Here's some apparently good news:
Rajat K. Gupta, the highest-ranking corporate executive to become embroiled in a push by the government to root out insider trading, pleaded not guilty Wednesday to charges of leaking confidential information while serving as a director at Goldman Sachs Group Inc. and Procter & Gamble Co.
In a six-count indictment, federal prosecutors in Manhattan alleged that Mr. Gupta, the former head of global consulting firm McKinsey & Co., leaked details about the companies' financial condition and an investment by Warren Buffett's Berkshire Hathaway Inc. to former hedge-fund titan Raj Rajaratnam. The Galleon Group founder was sentenced earlier this month to serve 11 years in prison for insider trading.
So a former Goldman Sachs director has gone to jail for insider trading. Great!
Or is it really such good news? The case against Gupta is closely related to the government's successful case against Raj Rajaratnam, leading to the longest-ever setence handed down for inside trading. Gupta has been arrested mostly for secretly and immediately handing over to Mr. Rajaratnam details of Berkshire Hathaway investments in Goldman Sachs after attending a private Goldman board meeting.
Gupta's name played prominently at the criminal trial earlier this year of Rajaratnam, who was convicted after prosecutors used a trove of wiretaps on which he could be heard coaxing a crew of corporate tipsters into giving him an illegal edge on blockbuster trades.
Jurors heard testimony that at an Oct. 23, 2008, Goldman board meeting, members were told that the investment bank was facing a quarterly loss for the first time since it had gone public in 1999.
Prosecutors produced phone records showing Gupta called Rajaratnam 23 seconds after the meeting ended, causing Rajaratnam to sell his entire position in Goldman the next morning and save millions of dollars.
Rajaratnam also earned close to $1 million when Gupta told him that Goldman had received an offer from Warren Buffett's Berkshire Hathaway to invest $5 billion in the banking giant, prosecutors said.
In one tape played at trial, Rajaratnam could be heard grilling Gupta about whether the Goldman Sachs board had discussed acquiring a commercial bank or an insurance company.
So Mr. Gupta betrayed private Goldman Sachs info to his good friend Mr. Rajaratnam, causing Mr. Rajaratnam to withdraw millions of dollars from Goldman. For this, Mr. Rajaratnam will go to jail for a very long time, and Mr. Gupta will likely join him.
But when Goldman Sachs institutionally and systemically fleeces and betrays its own customers, it gets a petty fine and no one goes to jail.
Moral of the story? Betray Goldman Sachs to your friend, spend a decade in pinstripes. Help Goldman fleece their investors and crash the economy? No problem. The Mafia has nothing on these guys, and they apparently own the Justice Department as well.
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