Update 3

Please note: the charges against Gupta are just charges and that he denies having passed any information to Rajaratnam. He also denies having profited from any of his Galleon investments. In fact, he claims he lost his entire investment. Also, this is perhaps the first time someone of Gupta’s stature has ever been charged with insider trading, which is usually never brought against managers, and never against anyone of his reputation, which, from all accounts, is sterling.

Update 2: It seems Gupta has been involved has also been accused of some shady deals in India that involved off-shore accounts, shell accounts, price-fixing (hmm… the government doesn’t fix prices?), and money-laundering, including an attempt to buy the Tamil Nadu Mercantile Bank, a very important bank in a state that receives the most foreign investment (Toyota, Ford, Hyundai all have shops there).

Who are those foreign investors, I wonder? And why did they want to buy a 33% stake in that particular bank? Remember TN is the state where Tamil separatism is strong and the Afro-Dalit movement is being fueled by foreign-funded NGOs and missionaries with divisive and false theories of history.

Update (November 21): I’m going to correct myself here.  I think the insider-trading charges by themselves are a side-show, but I have a feeling that they are only the tip of something else. And that something else might lie in India.

ORIGINAL POST

I was wrong about the threat to the US economy. I thought it had something to do with a tidal wave of cheap money fueling massive fraud, corruption, and crime.

I was thinking big. Along the lines of  trillions of dollars of derivatives, world-wide depression, and collapse of the paper-money system. At the heart of it was the Federal Reserve and a network of firms and speculators with Goldman Sachs at the center.

I was wrong.  It seems Goldman Sachs is actually one of the witnesses, standing in the wings, ready to testify against the really bad guy.

That would be this bloke,  Rajat Kumar Gupta.

Gupta is the former Worldwide Managing Director at McKinsey, board member of Goldman Sachs and Procter & Gamble (among many others); director of the Qatar financial authority; chairman of the board of the Indian School of Business, Harvard Business School, MIT Sloan (among others); Co-Chair of the American India Foundation and member of the board of the Bill and Melinda Gates Foundation (among others); and UN Sec. Gen. Special Advisor on UN Management Reform.

He is no longer any of these, of course.

He resigned his positions following his indictment on October 2, 2011 on six criminal counts of securities fraud and conspiracy in the Galleon Group investigation that has already led to a 11-year prison term for the head of Galleon, Sri Lankan born Raj Rajaratnam on 14 counts of insider trading and securities fraud (US v Rajaratnam). The Feds, bless their stony hearts, actually wanted to give him 19-24 years for doing what members of Congress do routinely, without a blink from anyone.

Insider-trading is not a victimless crime as it’s portrayed to be, but it’s also not out-and-out fraud.

And Gupta had a sterling reputation in the corporate world for decades before these charges.

Just for contrast, the Crazy Eddie case, perhaps the most notorious case of fraud before Enron, involved routine embezzlement of millions in company funds, falsification of accounts, money-laundering, securities fraud, and insider trading.  It earned Eddie only eight years in jail, of which he served less than two.

This is equality before the law?

Gupta was first charged by the SEC on March 2011 with administrative civil insider-trading charges for passing material non-public information to Rajaratnam, an old friend. He counter-sued, and both suits were dropped in August 2011.  Then came criminal charges, and Gupta surrendered to the FBI on October 26, before he was released on $10 million bail.

A lower middle-class boy from Calcutta who lost both parents in his teens, Gupta rose to become the first Indian-born CEO of a multinational  and a multimillionaire who hobnobbed with the richest men on Wall Street.

It was Some speculate that perhaps the proximity to the easy money of the hedge-fund crowd that led to the tragic end of what looks like an extraordinary career. Gupta was not just professionally successful but well-respected for his contributions to India’s development and humanitarian needs (especially in the wake of the Gujarat earthquake).  Apparently, whatever he did, he didn’t do it with an easy conscience, if Rajaratnam’s taped conversations are to be believed.

But something tells me there’s a whole lot more going on here than these details.

Trading on non-public information is a big no-no, true. But, Goldman Sachs gets to testify against Gupta? Look up the dictionary for “racketeer” and there’s a picture of G-Sachs,  as I’ve written before.

But I don’t see any charges, let alone a decade of jail-time, for, say, Hank Paulson.

Isn’t it strange that people like Robert Rubin (Citigroup’s corrupt chair who as Treasury Secretary tried to pull strings to prevent the downgrading of Enron’s debt rating when Citi was its biggest creditor); Hank Greenberg (whose years at AIG turned it into a hairball of corruption); Alan Greenspan (currency counterfeiter and market manipulator); Ben Bernanke (currency counterfeiter); and all the other malefactors who really did the damage to the world economy are still in business?

One of the insider tips for which Gupta was indicted was this one:

“Jurors in Rajaratnam’s trial also heard a telephone conversation, secretly wiretapped on Sept. 24, 2008, in which Rajaratnam tells Horowitz he had gotten a phone call saying “something good may happen to Goldman.” Prosecutors said Rajaratnam was referring to a tip from Gupta that Warren Buffett’s Berkshire Hathaway Inc. would invest $5 billion in Goldman Sachs.”

Say what?  Rajaratnam gets 11 years in jail for getting a tip about Buffett’s investment in GS?

And Buffett? Wasn’t that investment insider-dealing on Buffett’s part?

Economic Policy Journal notes:

” It appears that Warren Buffett has been given a pass for many years. His investment in Goldman Sachs at the height of the recent financial crisis, just before the government announced a bailout of Goldman and other investment banks, is highly suspicious. The purchase sure looks like a crony government-Buffett deal.
Early on I raised questions about Buffett’s timing on his recent Bank of America purchase. Now, NyPo is featuring questions about Buffett’s timing.”

I blogged about Buffett’s sweetheart deals in 2009, in this post and this one.

Let’s have a little proportion here, or else some of us are going to start thinking that these show trials (because that’s what they are) are just a convenient way to keep Asian Indian businessmen in their place and make it so they can’t challenge the older, more entrenched and powerful networks on the Street.

This is how a CFO from Infosys sees it:

“The government seems to have gathered enough evidence to show his complicity. What hurts is that Gupta’s punishment, if he is found guilty, will be disproportionate to his crime. And he, and Raj Rajaratnam of Galleon, are being publicly shamed and scanned while the Wall Street perpetrators of the U.S. sub-prime crisis which has led to massive joblessness and global economic recession, are being bailed out with taxpayer money and apparently forgiven their sins. “No one is punishing those who caused the global financial crisis through fraudulent means,” says Mohandas Pai, chairman of Manipal Universal Learning and former chief financial officer of Infosys Technologies, Bangalore.”

Still, as I’ve said, I still think there’s more than meets the eye here.

There is something much bigger than a few shady insider deals at stake.

This has to do with the whole anti-corruption and anti-money laundering drive in India. And, sure enough, the Indian government is investigating Gupta for his deals in India, as well.

I’ll bet all this is about fueling the Anna Hazare movement, with its weird resemblance to OccupyWallStreet, which, by the way, let out cheers when it heard about Gupta….

Curiouser and curiouser…