Former McKinsey chief and Goldman Sachs director Rajat Gupta convicted of insider trading

NEW YORK: Rajat K Gupta, the retired head of the consulting firm McKinsey & Company and a former Goldman Sachs board member, was found guilty on Friday of conspiracy and securities fraud. He is the most prominent business executive convicted in a wave of prosecutions that followed the government's sweeping investigation into insider trading on Wall Street.

After a monthlong trial, a jury of eight women and four men took only two days to deliberate before reaching a verdict. The jury found Mr Gupta guilty of leaking confidential information about Goldman to his former friend and business associate, the fallen hedge fund titan Raj Rajaratnam, on three different occasions in 2008. He was also convicted of conspiring in an insider trading scheme with Mr Rajaratnam.

Mr Gupta was found not guilty of two instances of tipping Mr Rajaratnam, including an allegation that he divulged secret news about Procter & Gamble, where he also served on the board. "Having fallen from respected insider to convicted inside trader, Mr Gupta has now exchanged the lofty board room for the prospect of a lowly jail cell," Preet Bharara, the United States attorney in Manhattan said in a statement.

"Almost two years ago, we said that insider trading is rampant, and today's conviction puts that claim into stark relief."

After the verdict was read, Mr Gupta, 63, remained stoic, his face expressionless. Just behind Mr Gupta, his wife, Anita, buried her head in her hands, leaning against a bench in the courtroom. His four daughters, who had squeezed into the front row of the spectators' gallery each day during the trial, loudly sobbed and consoled one another. Several jurors were crying as they left the courtroom.

Jed S. Rakoff, the judge in the case, set sentencing for Oct. 18 and said he was inclined to set Mr Gupta is free on bail until then.

Mr Gupta faces a maximum sentence of 25 years in prison, but will likely serve less time than that. Mr Rajaratnam, the former head of the Galleon Group hedge fund who was convicted of orchestrating a huge insider trading conspiracy last year, is serving an 11-year jail term.

Mr Gupta is one of the 66 Wall Street traders and corporate executives charged with insider trading crimes by Mr Bharara, since 2009. Of those, 60 have either pleaded guilty or been found guilty.

Juries have now convicted all seven who have taken their cases to trial.

The outcome in Mr Gupta's trial was a substantial victory for the government. There had been a big question mark whether prosecutors could win a case built largely on circumstantial evidence - phone records and trading logs -of the defendant's guilt. No witness testified to the contents of any calls between Mr Gupta and Mr Rajaratnam. The case lacked the dozens of incriminating wiretaps that prosecutors played at Mr Rajaratnam's trial.

The criminal charges against Mr Gupta, which were brought last October, stunned the global business world. Not since last decade's corporate crime spree, when Enron's Jeffrey K. Skilling and WorldCom's Bernard J Ebbers received lengthy prison terms, or the Wall Street scandals of the late 1980s that led to jail time for the financiers Michael Milken and Ivan Boesky, had a corporate executive fallen from such lofty heights.

Mr Gupta, a native of Kolkata, India, was orphaned as a teenager. After earning an engineering degree, Mr Gupta moved to the United States after receving a scholarship to Harvard Business School. He then landed a job at McKinsey, the elite management-consulting firm. In 1994, at age of 45, Mr Gupta was elected the global head of McKinsey, the first non-American-born executive to run the firm.

In 2007, after nearly four decades of dispensing business wisdom to corporate chieftains and government leaders, Mr Gupta retired from McKinsey and became highly sought after as a public-company director.

He joined the boards of some of the world's most well-known companies, including Goldman and Procter & Gamble.

In recent years, Mr Gupta had also devoted much of his time to humanitarian causes, raising millions of dollars to combat AIDS, tuberculosis and malaria. He served as an adviser to both the Bill and Melinda Gates Foundation and the Clinton Global Health Initiative. When President Obama hosted his first White House state dinner in 2009, honoring a visit by India's Prime Minister, Mr Gupta and his wife, Anita, were on the guest list.

The jury appeared to reject one of Mr Gupta's central defences: That it was inconceivable that a person of Mr Gupta's station would risk destroying his career by passing along a handful of boardroom secrets.

To bolster this point, the defence put on six character witnesses who told the jury about Mr Gupta's sterling reputation, unimpeachable integrity, and extensive charitable works.

"Having lived a lifetime of honesty and integrity," said Gary P Naftalis, a lawyer for Mr Gupta, in his opening statement, "he didn't turn into a criminal in the seventh decade of an otherwise praiseworthy life."

Yet the government, which was represented by federal prosecutors Reed Brodsky and Richard C. Tarlowe, countered with powerful, if at times tedious, evidence that Mr Gupta brazenly divulged confidential discussions by the boards of both Goldman and P&G to Mr Rajaratnam.

Prosecutors built their case around phone records, trading logs, instant messages and e-mails that showed a pattern of insider trading. Mr Gupta would participate in Goldman board calls, and soon after disconnecting from those calls - sometimes within minutes - Mr Gupta would call Mr Rajaratnam. Mr Rajaratnam would then trade shares in Goldman based on Mr Gupta's tips.

The circumstantial evidence was bolstered by three telephone conversations between Mr Rajaratnam and Galleon colleagues that were secretly recorded by the F.B.I. On those wiretapped calls, Mr Rajaratnam boasted that he had traded Goldman stock because he had a source inside the bank.

"I heard yesterday from somebody who's on the board of Goldman Sachs that they are going to lose $2 per share," Mr Rajaratnam said on one of those calls, from October 2008.

During his closing arguments, Mr Brodsky, a prosecutor, called this "perfect evidence of insider trading."

Goldman was on center stage - and in an uncomfortable spotlight - through much of the case. Several of the bank's top officials testified during the trial, including Lloyd C. Blankfein, its chief executive.

Called to the witness stand by the prosecution, Mr Blankfein described the secrecy surrounding Goldman board meetings. There was substantial testimony about the Warren E. Buffett's $5 billion investment in Goldman Sachs during the financial crisis, news that Mr Gupta allegedly leaked to Mr Rajaratnam before it was publicly announced.

The defence also maligned Goldman throughout the trial, suggesting that the close business ties between Goldman and Galleon meant that there were numerous sources at the bank feeding inside tips to Mr Rajaratnam.

"The wrong man is on trial," Mr Naftalis, Mr Gupta's lawyer, told the jury.

The case has been a major embarrassment for the executives at McKinsey, which Mr Gupta ran from 1994 to 2003. A trusted adviser to Fortune 500 companies, McKinsey counts among its alumni Sheryl Sandberg, the chief operating officer of Facebook, and James Gorman, the chief executive of Morgan Stanley.

"McKinsey's core business principle is to guard the confidential and private information of its clients," said a former McKinsey executive who only spoke on the condition of anonymity. "It is mind blowing that the guy who ran the firm for so many years could be going to jail for violating that principle."

Mr Gupta's alleged illegal conduct started after he retired from McKinsey. In 2007, Mr Gupta left behind the staid world of management consulting and turned his focus to Wall Street.

It was then that Mr Gupta fell in with Mr Rajaratnam, who he originally met through philanthropic activities. At the time, Mr Rajaratnam, a Sri Lankan native, was at the peak of his powers, a billionaire hedge fund manager with a superior investment track record. For Mr Gupta, who wanted to raise his profile in the lucrative world of money management, Mr Rajaratnam was a topnotch connection.

Together, the two helped start a private equity firm, New Silk Route, which made investments in India. Mr Gupta invested at least $13 million in Galleon hedge funds and took on a fund-raising role at the firm. He accepted an advisory post at the investment giant Kohlberg Kravis Roberts & Company that promised to pay him millions of dollars a year. He told a colleague that he was raising money for a telecom fund with financial backing from AT&T.

During a telephone conversation between Mr Rajaratnam and Anil Kumar, a former McKinsey executive who has pleaded guilty to insider trading, the two gossiped about Mr Gupta ambitions to make more money, focusing on his job at KKR, a position that might have forced him to resign from Goldman's board because of conflicts. (He ultimately remained on both.)

"I think he wants to be in that circle," said Mr Rajaratnam, in August 2008. "That's a billionaire circle, right?" Goldman is like the hundreds of millions circle, right?"

Mr Gupta's friends adamantly dispute the notion that Mr Gupta was driven by materialism. After all, they say, Mr Gupta had plenty of money, pointing to testimony at the trial from his private banker at JPMorgan Chase that pegged his family's net worth at $130 million. In addition to his home in Westport, a waterfront mansion once owned by the retail executive JC Penney, he has vacation houses in Florida and Colorado.

"I don't know who came up with this business that Rajat had billionaire envy," said Anil Sood, a childhood friend from India who now lives in Virginia. "He has always been quite content with his wealth, and in my mind that's not the least bit credible."
via ~ timesofindia

Asia stocks fall after Europe debt turmoil worsens

stock markets fell Thursday, as ominous signs emerged that a debt crisis that has been roiling Greece and then Spain is about to erupt elsewhere on the continent.

Investor sentiment was battered by developments Wednesday, when Italy's borrowing costs rose and Cyprus said it may seek an emergency bailout this week.

Yet another troubling sign came out of Spain, whose 10-year borrowing rate inched up to 6.71 percent from 6.67 percent. That is close to the 7 percent rate that led Greece, Portugal and Ireland to seek bailouts.

Japan's Nikkei 225 index fell 0.7 percent to 8,528.51. Hong Kong's Hang Seng dropped 0.8 percent to 18,877.40 and South Korea's Kospi was nearly flat at 1,858.73.

Moody's, the credit ratings agency, downgraded Spain's government debt three notches late Wednesday, placing it one level above junk status. It downgraded Cyprus's debt by two, pushing it deeper into junk rating.

Italy, meanwhile, had setbacks of its own. Its 10-year borrowing rate rose to 6.07 percent from 6.02 percent, and the interest rate on its one-year bonds also rose sharply.

Greece will hold elections Sunday, and voters may endorse a party that wants to cancel the terms of Greece's own bailout. That would almost certainly force Greece to leave the euro currency.

"The Greek election will undoubtedly be seen as a landmark event in history, as it goes to the core of Greece's continuation in the eurozone and the fate of the region itself," Cameron Peacock of IG Markets in Melbourne said in a market commentary.

The turmoil in Europe weighed Wall Street down on Wednesday. The Dow Jones industrial average fell 0.6 percent to 12,496.38. The Standard & Poor's 500 fell 0.7 percent to 1,314.88. The Nasdaq composite index fell 0.9 percent to 2,818.61.

Benchmark oil for July deliver was down 23 cents to $82.39 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 70 cents to finish at $82.62 per barrel on the Nymex on Wednesday.

In currency trading, the euro fell to $1.2561 from $1.2589 late Wednesday in New York. The dollar rose to 79.42 yen from 79.33 yen.

via ~ news.yahoo

Assange appeals against UK extradition decision

LONDON (Reuters) - WikiLeaks founder Julian Assange has appealed against Britain's Supreme Court's decision to back his extradition to Sweden over alleged sex crimes.

Two weeks ago, judges at Britain's top court rejected his argument by a 5-2 majority that a European arrest warrant for his extradition was invalid, seemingly putting an end to an 18-month legal battle.

However, his lawyers argued that some of the judges had reached their decision based on a legal point that had not been argued in court, preventing the defense team from making a counter-submission.

The court agreed to give Assange 14 days to challenge the decision and a spokeswoman said on Tuesday that an appeal had been submitted.

"No time has been set to look at the evidence," the spokeswoman said. "We are hoping it will be done promptly."

The former computer hacker gained international prominence in 2010 when WikiLeaks began releasing secret video footage and thousands of U.S. diplomatic cables about Iraq and Afghanistan, in the largest leak of classified documents in U.S. history.

That made him a hero to anti-censorship campaigners but Washington was furious about the release of classified documents.

Swedish prosecutors want to question Assange over allegations of rape and sexual assault made by two female former WikiLeaks volunteers. He denies any wrongdoing and has been fighting extradition since his arrest in Britain in December 2010.

His lawyers argue the European arrest warrant was invalid because it was issued by a prosecutor and not a judge or a court, as required in Britain. Prosecutors say different legal procedures are allowable under the internationally agreed format.

Even if he loses the appeal in Britain, the Australian could take his case to the European Court of Human Rights, potentially holding up the extradition process for months.

via ~ news.yahoo

Spy-in-sky tech that peeps into your privacy

You think technology has made life easier, safe and secure. Think again. For U.S. tech giants are using military-grade cameras so powerful that they can see into homes to produce aerial maps which can show up objects just four inches wide.

Google and Apple will use new hi-tech mapping planes that can film through skylights and windows, putting privacy at risk, the Daily Mail has reported.

The technology is similar to that used by intelligence agencies in identifying terrorist targets in Afghanistan, the report said.

Google has admitted to having sent planes over cities, while Apple has acquired a firm using spy-in-the-sky technology that has been tested on at least 20 locations, including London.

The search engine giant will use its spy planes to help create 3D maps with much more detail than its satellite-derived Google Earth images.

Google expects by the end of the year to have 3D coverage of towns and cities with a combined population of 300 million. It has not revealed any locations so far.

Current 3D mapping technology relies on aerial images taken at a much lower resolution than the technology Apple is thought to be using. This means that when users ‘zoom in’, details tend to be lost because of the poor image quality.

Spy planes are able to photograph around 40 square miles every hour, suggesting they would be flying too quickly and at too great a height to access domestic wi-fi networks.

But experts say the technology is a sinister development that brings the surveillance society a step closer.

Nick Pickles, director of Big Brother Watch, warned that privacy risked being sacrificed in a commercial ‘race to the bottom’. “The next generation of maps is taking us over the garden fence,” he said. “You won’t be able to sunbathe in your garden without worrying about an Apple or Google plane buzzing overhead taking pictures,” he warned.

Apple has previously used Google for its mapping services but last year it emerged it had bought C3 Technologies, a 3D mapping company that uses technology developed by Saab AB, the aerospace and defence company.

At the time C3 had already mapped 20 cities and it is believed to have added more with Apple’s backing. Its photographs have been shot from 1,600ft and one C3 executive described it as ‘Google on steroids’.

GOP focuses on Obama in bid for Giffords' seat

Republicans are focusing on President Barack Obama, not Gabrielle Giffords, and sensing a chance to capture the former congresswoman's seat in southern Arizona.

Voters are deciding in Tuesday's special election whether Republican Jesse Kelly, who narrowly lost to Giffords in 2010, or Democrat Ron Barber, a former Giffords aide asked by the lawmaker to pursue the seat, will complete the remainder of her term.

Giffords relinquished the seat in January to concentrate on her recovery from a gunshot wound to the head. Giffords and Barber were injured in the January 2011 shooting rampage outside a Tucson grocery store that killed six people, including a 9-year-old girl and a federal judge, and wounded 11 others.

Giffords largely has shunned public appearances in the race, but in the closing days is stepping out to help Barber. She joined the candidate at a get-out-the-vote rally Saturday.

Holding onto the seat is crucial for Democrats if they want to regain control of the House.

The party needs a net gain of 25 seats in November to grab the majority from Republicans, who now hold a 240-192 advantage with three vacancies, including Giffords' seat. Reflecting the closeness of the Arizona contest, Democrats made a last-minute appeal for money that referred to Kelly as a "radical tea party Republican" and said Barber would fight to continue Giffords' legacy in Congress.

Republicans who scoff at Democratic claims about winning the House are riding high after a decisive victory in Wisconsin's gubernatorial election last Tuesday and have set their sights on Arizona. A victory Tuesday would give party leaders a chance to claim momentum five months before November and fine-tune their plan to link Democratic candidates to Obama, the incumbent at the top of the ticket.

"Rubberstamp Ron Barber. More failed Obama policies that hurt Arizona," says the latest television ad from the National Republican Congressional Committee.

Early voting began May 17. Republican-affiliated groups have spent $1.3 million compared with $900,000 by Democratic-affiliated groups. The outside spending has helped Kelly counter Barber's fundraising edge. Barber had $390,000 cash on hand at the end of May to Kelly's $83,000.

More than 123,000 people had returned ballots they received by mail, and it's anticipated that nearly two-thirds of the votes cast will be done through early voting.

Kelly says he would seek to repeal Obama's health care overhaul law and oppose any effort to end the tax cuts enacted under President George W. Bush. Barber talks about changing some parts of the health law, requiring the wealthy to pay more to produce revenue and lowering taxes on the middle class.

Republicans seized on Barber's recent stumble. In the latest candidate debate, Barber declined to say whom he would vote for in the presidential election. Republicans said Barber couldn't be honest with voters. He campaign tried to clarify his nonanswer, saying later that he supported the president.

"That question in the debate was a diversion, an attempt to nationalize the debate," Barber told The Associated Press. "This is about southern Arizona. It's not about the president."

Democrats are trying to cast the 30-year-old Kelly as too extreme for a district that has historically supported lawmakers who reached across the aisle to forge compromise. Before Giffords, Republican Jim Kolbe represented the district for 22 years.

Democrats point to Kelly's past comments about Social Security, including his remark in the 2010 race that "you have to take steps to reform it, to privatize it, to phase it out."

A Democratic-affiliated group, the House Majority PAC, is running an ad filled with past Kelly comments. Most notably, he criticized Giffords during the 2010 campaign, saying, "and now she stands there with that smile and pretends to be some kind of hometown hero. She's a hero of nothing," he said.

The ad's narrator notes the comments were made two years ago — months before the shooting — but that distinction could be lost among those focused on the disdain in Kelly's voice as he speaks of Giffords. The comments came as Kelly was talking about spending policies Giffords supported that he said were bankrupting the nation.

Kelly, a 6-foot-8 Marine who served in Iraq, has shifted his position on several issues. On his campaign website, he said he would not support any overhaul of Social Security that would privatize it, cut benefits or raise the retirement age. He also has aired a television ad with his grandfather where he promises to protect Social Security and Medicare.

Kelly's campaign declined to make him available for an interview with the AP.

Barber, 66, says that future generations are financing the benefits that older people now receive. Letting workers opt out of the program now would simply lead to the program's collapse.

"Getting people out of the program will not save it," Barber said when the two debated in late May.

Democrats argue that Barber will continue Giffords' work and hope the good will that she engendered with Arizona voters who have following her recovery will benefit him. Before serving as a Giffords aide, Barber worked with the disabled and their families at the Arizona Division of Developmental Disabilities. He and his wife also owned two children's toy and clothing stores.

Jeffrey Rogers, chairman of the Pima County Democratic Party, said he believes voters will be comforted by the mild-mannered, soft-spoken Barber. But Rogers did express surprise that Barber didn't rely on Giffords more for the campaign.

"I would have brought her in more," he said. "She's very popular."

Barber insists that his campaign has reached out to Giffords and "she has done everything we have asked her to do."

After Tuesday's election, the candidates will immediately regroup in an effort to win a full term that would begin with next year's Congress.

Most voters in the current district will become part of the newly redrawn district that becomes more Democratic, with the Republican voter-registration edge dropping from about 25,500 to about 2,000. Independents will continue to play a big factor in determining who represents the region in Congress. Registered independents make up about 31 percent of the voters in the new district.

via ~ news.yahoo