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

Change In 'Accredited Investor' Definition Could Hurt Crowdfunding Space

Jul 25 2014 | 8:14am ET

The Securities and Exchange Commission is considering changes to its 30-year-old...

Lifestyle

David Yarrow On Growing His Hedge Fund And Shooting The Animals And People Of Africa - As A Photographer

Jul 23 2014 | 6:44am ET

While he’s always been a photographer, recent expeditions to Iceland, Ethiopia...

Guest Contributor

The Truth About Track Record Portability

Jul 24 2014 | 5:55am ET

The number of private funds converting to mutual funds has increased significantly...

 

Sponsored Content

    Northern Trust Helps Hedge Funds Navigate Derivatives Regulations

    Jul 8 2014 | 10:48am ET

    The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…

Publisher's Note