ISB Hyderabad Chairman takes off sheen from another Indian success story

The former Procter & Gamble Chairman and CEO Alan Lafley thinks of him " like Thomas Aquinas", the philosopher and priest. George Bush showered praise on him for his "compassion and concern" and wanted it to be known that they studied in the same graduate school. When 'The McKinsey Quarterly' ran an India special, he was the one to sit down with Dr. Manmohan Singh and learn about coalition politics and compromises.

He is, of course, Rajat Kumar Gupta, that high priest of consulting, the leader who has whispered strategies and solutions into the ears of those who run and manage the best of America Inc. and the jewel in the long line of Indian-American success stories.

Now, at age 62, the United States Securities and Exchange Commission (SEC) says the information he acquired during some of those board meetings was illegally disclosed and went out as tips to hedge fund manager Raj Rajaratnam and helped generate USD 18 million in illicit profits.

Gupta, a former director of Goldman Sachs and a former Managing Director of Mckinsey and Company, resigned from the boards of AMR Corporation and its subsidiary American Airlines Inc., and two other US companies on Tuesday. Earlier, he had quit as director of Procter and Gamble.

Raj Rajaratnam faces criminal charges but Gupta will face proceedings in an administrative court, where defendants do not enjoy a jury trial and the SEC can seek monetary penalties.

"Gupta was honoured with the highest trust of leading public companies, and he betrayed that trust by disclosing their most sensitive and valuable secrets," said Robert Khuzami, Director of the SEC's Division of Enforcement. " Directors who violate the sanctity of board room confidences for private gain will be held to account for their illegal actions." Gupta is an American citizen but his stature and his deep connections with the best of the corporate world in India and across the globe are doing their bit to take at least some sheen off the success stories told of Indians who have made their mark globally, and notably in the US.

Gupta denies the charges. Gupta has not resigned as Chairman of the Indian School of Business, Hyderabad, a B-School that has a long list of patrons from across the globe and support from the Who's Who in the Indian corporate world. Sriram Gopalakrishnan, Director - Marketing and Communications at the ISB, told us that Gupta had not resigned.

It is at the ISB that Gupta is said to have come in touch with Rajaratnam, the man to whom he allegedly illegally passed on tips of big decisions before those decisions were made public, leading to trades that would bring illegal profits.