Gupta Sought To Quit Goldman Board To Join KKR

Mar 14 2011 | 2:51pm ET

Rajat Gupta, the former McKinsey & Co. chief and accused Raj Rajaratnam tipster, nearly left the Goldman Sachs board to join Kohlberg Kravis Roberts just weeks before he allegedly passed confidential information about Goldman on to the Galleon Group founder.

In a nine-minute-long wiretap released by prosecutors on Friday, Rajaratnam and former McKinsey partner Anil Kumar discuss their friend's situation, painting a picture of a troubled man just over a month before he allegedly passed Rajaratnam information about Berkshire Hathway's planned investment in Goldman.

Gupta actually submitted his resignation from the Goldman board on Sept. 9, 2008, more than three weeks after Rajaratnam and Kumar discussed his plans, The New York Times reports. But he was persuaded to remain on the board by CEO Lloyd Blankfein and other Goldman executives, who feared a public relations backlash if a board member left at the height of the financial crisis.

Gupta said he wanted to leave the Goldman board to become a senior adviser to KKR; Gupta and KKR founder Henry Kravis are friends. But Rajaratnam said on the Aug. 15 phone call with Kumar that the real reason was "the perceived conflict of interest" between Goldman and New Silk Route Partners, the private equity firm he co-founded with Rajaratnam.

Gupta, who denies tipping Rajaratnam, did take the post with KKR, resigning earlier this month after he was sued by the Securities and Exchange Commission. Rajaratnam said on the wiretapped call that, in addition to the New Silk Route issue, Kumar was "enamored with Kravis, and I think he wants to be in that circle. That's a billionaire circle, right? Goldman is like the hundreds of millions circle, right?"

"I think here he sees the opportunity to make $100 million over the next five or 10 years without doing a lot of work."

"But is it really that he was so greedy for the $12 million that KKR has offered him?" Kumar wonders, while Rajaratnam says he was actually offered "about $5 million a year with upside."

KKR has disputed all of those figures.

Rajaratnam and Kumar indicated their concern for Gupta, whose lawyer has said that, at the time of the alleged tips, relations between his client and Rajaratnam had cooled.

"At some point, what I worry about is that there can be this massive implosion in him," Kumar said.

"He didn't seem comfortable," Rajaratnam offered. "He seemed like he was tormented."


In Depth

Virtu Celebrates Another Year Without a Single Day of Losses

Feb 26 2015 | 9:05am ET

High-frequency trading firm Virtu Financial Inc. reported another year without a...

Lifestyle

Hedge Fund Manager Out as Minnesota Wild Minority Owner

Feb 25 2015 | 2:45pm ET

New York hedge fund manager Philip Falcone is no longer a minority owner of the...

Guest Contributor

Risk: How To Get In Front Of The Problem

Feb 26 2015 | 9:53am ET

In considering the topic of risk in the hedge fund world, specifically, the oversight...

 

Editor's Note