Authors: Anita Raghavan
Tags: #Finance, #Business & Economics
Their love flourished in censored letters during Gupta’s years in prison. In early 1947, at the urging of friends and before India’s independence, Ashwini Gupta married Pran Kumari. The two belonged to different Hindu reform groups, but they were too progressive to care. The wedding took place on the campus of Bethune College. It was a modest affair. The Guptas were not showy people. Besides, though few knew it at the time, Ashwini Gupta’s incarceration had left the family in dire financial straits.
Soon after marriage, Ashwini and Pran started a family, eager to make up for lost time. Their first child, a daughter, was born in 1947. Thirteen months later, on December 2, 1948, came Rajat; his pet name was Ratan, meaning “gem.” Then, after two years, the Guptas welcomed another daughter. The family of five squeezed into a three-room flat on a busy main road in North Calcutta, around the corner from Ashwini’s brother’s green-shuttered house on Rajendra Lal Street.
* * *
On the morning of Thursday, November 5, 1964, Apurba Maitra—now a citizen of an independent India—unfolded his morning newspaper to find a photo of Ashwini Gupta on the front page.
Earlier on that same muggy morning in November, Ashwini’s eldest son, fifteen-year-old Rajat Kumar Gupta, dressed himself, carefully draping his best white dhoti over his body. Growing up in a close-knit Indian family of four children, two girls and two boys, the youngest born after the family moved to New Delhi in the 1950s, Rajat was accustomed to shouldering responsibility. He and his older sister were always looking after their younger siblings. By economic necessity, his parents were a two-career couple long before it was in vogue. His mother taught at the local Montessori school, and upon his release from prison, Ashwini took up journalism as a means to support himself and his family.
His old revolutionary ties to the leaders of a newly free India helped him rise. After India’s independence, he was dispatched to start the Delhi edition of the
Hindusthan Standard
. He was a frequent visitor to Rashtrapati Bhavan, the official residence of the president of India, and it was well known among the Delhi press corps that the country’s first prime minister, Jawaharlal Nehru, called him by his first name. So trusted was Gupta by government ministers that they would often seek his counsel on how to deal with the press. Born as a British subject, Ashwini Gupta, through hard work and sacrifice, became an insider in modern India.
Rajat then steeled himself and walked into the anteroom of his uncle’s Calcutta home at 19C Rajendra Lal Street to say farewell. Shrouded with heaps of roses, marigolds, and fragrant jasmine, his father lay in a coffin. As was customary, the body was washed in purified water and dressed in a white kurta (a loose-fitting shirt) and a white dhoti.
When he’d arrived at the hospital the previous day, he was told his father was dead. But as he stood at the entrance to his father’s room, he saw a plastic bag, still attached, bubbling with air from his father’s last gasps. For a moment, he thought the doctors had made a mistake. But the years of struggle and incarceration had taken their toll. At fifty-six, Ashwini Gupta was dead of kidney failure.
In the months leading up to his father’s death, young Rajat had spent a lot of time with his father, accompanying him on long walks and listening to stories of his time in the freedom movement. He learned that his father had been intentionally exposed to TB in prison, which ultimately cost him the use of one lung. The ragged two-foot-long scar on his back came from his skin being split open over and over again during one particularly brutal interrogation. Yet in spite of it all, the father he knew was kind and obliging to everyone. He would later recall, “He never spoke ill of anybody, and I would have thought he would have a lot of resentment built into him, but it wasn’t true. [This attitude] was true of most of my father’s generation…They were quite extraordinary in terms of simple living and high thinking and not thinking ill of other people.”
This morning, in front of Rajat’s uncle’s house, a crowd gathered; neighbors, friends, and admirers descended like pilgrims on a sorrowful journey. Door-to-door launderers (dhobi-men) and their donkeys watched as a coffin was placed into a glass-topped hearse parked in front of the redbrick house with the green shutters. In tribute, the dhobi-men nudged their donkeys away from the mourners and solemnly cleared a path for the procession.
At 9 a.m., the hearse, closely followed by cars carrying the immediate family, departed. As the throng approached the top of the street, Rajat could make out a small shrine to Shiva, the Hindu god of destruction. After a stop at the offices of his father’s employer, the newspaper group
Anandabazar Patrika
, he led the crowd to Whitetown.
On the other side of town, Maitra raced to catch one final glimpse of Ashwini Gupta. He ran to a crematorium known as the Nimtollah burning ghat, then south to the Keoratola funeral parlor, to no avail. On his last guess, he found the right destination. Clenching a fistful of flowers, he elbowed through a crowd of hundreds of friends, family, and admiring strangers and made his way beyond the row of bodies stacked in a line to be cremated.
At last, after pushing his way past Ashwini Gupta’s brother, the former prison guard made it to the coffin. Ashwini Gupta’s teenage son, Rajat, was just completing the final death rite. In the silence that followed, Maitra was able to place what was left of his bunch of lotus flowers on the feet of his fallen friend. Rajat Gupta then helped roll the stretcher holding his beloved father’s body into the orange flames of Calcutta’s electric crematorium.
Overcome with grief, Maitra muttered a prayer to his dead friend, Ashwini: “Pray not a grain of hatred remains mingled in your ashes. I tried to atone for my sin.” If he hadn’t been awash in his own sadness at the premature death of one of India’s unsung heroes, Maitra might have heard another voice—the tender voice of Rajat Kumar Gupta quietly beseeching a higher power:
“Who will show me the way in the world?”
It was three days before Christmas when Rajat Gupta, dressed in a gray pin-striped suit and flanked by his three lawyers, arrived at the visitors’ reception on the fourth floor of the US Securities and Exchange Commission’s New York headquarters. His white shirt was perfectly pressed and his black hair, tinged with touches of gray, impeccably groomed. He and his lead counsel, Gary Naftalis, looked like they had stepped out of a regional theater production of
The Odd Couple
. Naftalis was the absent-minded professor, his suit rumpled and his white hair flying. Gupta, solemn and distinguished, had the presence of a dignified head of state. Never in his wildest dreams did he expect at his age—he’d turned sixty-two a few weeks earlier—and with all his accomplishments, to be embroiled in the kind of matter that prompted his sit-down with the SEC on this morning in December 2010. Surely this must be a misunderstanding that could be resolved.
A year had passed since Goldman Sachs’s head counsel had first told Gupta that he was being drawn into a government investigation. He had spent much of the time in the dark, frustrated by the swirling innuendos but powerless to quell them. Privately and publicly, he denied that there was anything to this nascent blemish on an otherwise spotless career. Now, with one of the country’s most prominent criminal defense attorneys by his side, he would be meeting with the government’s lawyers for the first time. He was to be deposed in the matter of Sedna Capital Management LLC, a little-known and now defunct New York hedge fund.
For four full years, the investigation into Sedna had consumed Sanjay Wadhwa, the deputy chief of the SEC’s Market Abuse Unit. It already had produced the biggest case the SEC had ever brought against a New York hedge fund manager. Now Wadhwa was preparing to build a new, possibly even bigger case. After much maneuvering and countless delays, he and his team of SEC lawyers were finally going to interview the most respected Indian executive in America, the man who had blazed a trail that younger Indian-Americans like Wadhwa followed.
Despite flecks of white in his jet-black hair and graying sideburns, the forty-four-year-old Wadhwa looked a decade younger. He was trim, wore wire-rimmed glasses, and had a deceptively benign, contemplative face. Born in New Delhi, Wadhwa came to the United States when he was nineteen years old. A tax lawyer by training, he is a Punjabi Indian who was raised to revere pioneers like Gupta who had shown a younger generation the pathway from India’s backstreets to America’s corridors of power. The stops along Gupta’s journey—the Modern School in Delhi, the hypercompetitive Indian Institutes of Technology, Harvard Business School—were well known in the Indian-American community. Wadhwa’s story was a less familiar but equally emblematic one.
Wadhwa’s father, Arjun, was born in January 1937 into a working-class family in Lahore, then a city in northwest India that owed its splendor to a succession of invaders. The Mughals gave Lahore beautiful gardens and much of its inspiring architecture. The British, who followed the colorfully turbaned Sikhs as rulers, endowed the city with enduring administration buildings, styled after the Victorians’ architecture.
Sanjay’s mother, Rashmi, was born just a year and a half later in Sargodha, a city one hundred miles northwest of Lahore on the way to Afghanistan.
Before India’s declaration of independence, both Lahore and Sargodha were part of Punjab Province, a collection of 17,932 towns and villages with 15 million Hindus, 16 million Muslims, and 5 million Sikhs. Despite the hodgepodge of religions and a history of bad blood between them, the Hindus, Muslims, and Sikhs managed to live in relative peace under the British. The time-tested philosophy “The enemy of my enemy is my friend” held fast.
At first, Arjun Wadhwa’s family, like other Hindus, mingled freely with Muslims. The children attended school together and parents socialized. Lahore was held up as a model of tolerance, a place where Hindus, Sikhs, and Muslims lived for centuries with little rancor.
Political expediency changed that.
India’s independence from Britain in 1947 required Partition, as the division of India was known. To quell Muslim unrest and accelerate the departure of British forces in India, the Indian Independence Act of 1947 split two of the country’s most distinctive provinces, Punjab and Bengal. Parts of both formed the Islamic Republic of Pakistan. West Bengal was part of India, but East Bengal became Pakistan. Similarly, part of Punjab went to Pakistan and half stayed with India.
For Wadhwa’s family, as for many Punjabis, Partition meant starting over. In June, Arjun, his two sisters, his two brothers, and their mother boarded a train to Haridwar, a holy city for Hindus that was expected to remain in India after Partition. His father stayed behind.
As they were leaving Lahore, ten-year-old Arjun Wadhwa was struck by the desperation. Whenever the train made stops, “people would try and get into the compartment—they would try and sit in the vestibules,” recalls Wadhwa. “Even if they didn’t have a ticket they would get on the train—they wanted to save themselves.” Around the same time, on a separate train, Arjun’s future wife and Sanjay Wadhwa’s mother, eight-year-old Rashmi, left Sargodha, where her family owned vast swaths of land and her father, a government contractor, was well connected, even friendly with the Muslim police commissioner. He was so tied to Sargodha he would stay in his ancestral home until August 14, making the trek to Delhi like thousands of other displaced Punjabis only after it was clear that Sargodha would go to Pakistan.
Partition triggered a mass migration of people, with about 7.2 million Hindus and Sikhs moving to India from the newly created Pakistan and an equal number of Muslims making the reverse migration. One million lives were lost along the way, many victims of brutal sectarian violence.
Stemming bloodshed as a result of Partition was just one of the goals on the new republic’s political agenda. Independent India’s first leader, Jawaharlal Nehru, invited the country’s masses to fulfill their “tryst with destiny” and “awake to life and freedom.” In his maiden speech to the young republic, he vowed to end “poverty and ignorance and disease and inequality of opportunity.” But by the time Arjun and Rashmi Wadhwa welcomed young Sanjay into the world in October 1966, none of Nehru’s promises had come to pass. The country stagnated in an economic swamp that deepened in the 1970s under Nehru’s daughter and India’s leader, Indira Gandhi.
For ordinary Indians, life was a hard slog. Food was scarce. Essentials such as sugar and rice were rationed and queues were common. Even though wheat was abundant in states like Punjab, the roads were so poor it could not be delivered quickly to India’s starving masses. Installing a private phone took months or even years. It helped to secure a letter from a member of Parliament to get a second line or a gas cylinder.
Alarmed by rampant corruption and worried about soaring unemployment, Arjun Wadhwa fretted about the future—not so much for himself but for his teenage son, Sanjay, and his two daughters. Inspired by the success stories of men like Rajat Gupta—the Calcutta boy who headed to Cambridge, Massachusetts, in 1971—many, including Arjun’s own brother, left home looking for opportunity. If Wadhwa didn’t join soon, his family could be sucked into India’s vortex of despair. In 1985, he took his brother up on his offer to sponsor him for a green card.
At the age of forty-eight, Arjun Wadhwa left his wife and children in Calcutta to start a new life for them in Lake Worth, Florida—a coastal city on the Atlantic Ocean. Despite his years as a seasoned business manager in India, he began at the bottom. He joined a Florida drugstore chain as a management trainee. After just a year, he sent for his family. Soon he was promoted to assistant store manager.
Arjun’s wife and three children left their home with only a few suitcases in hand. Sanjay’s mother had just $100 cash—a reminder that despite the depth of their sadness, they were doing what was necessary. In an effort to conserve India’s perilously low currency reserves, the government restricted the amount of money each person could take out of the country.
In America, it proved difficult to support a family of five on an assistant manager’s salary, so the Wadhwa children worked their way through college. Sanjay focused on accounting and got a bachelor’s degree in business administration from a tiny, little-known college (Florida Atlantic University). He picked it because it was the only school with a decent accounting program within driving distance of his parents’ home. There was no way he could afford to live on campus. Even with a full course load, he worked fifty hours a week as a stockroom boy and cashier in a local drugstore, earning the tuition he needed for the next semester. After graduating, he received his JD from the South Texas College of Law. Then he headed to Manhattan.
He had always dreamed of working in New York, sensing that his father, who had an MBA, might have had more opportunities in America if he had landed in New York rather than Florida. But he also knew there was little chance of him being hired by a white-shoe firm in New York without a degree from a top-tier law school, so he did what pragmatic Indians did. He went back to law school and graduated among the top of his class with a degree from New York University in tax law. If there ever was a guarantee of steady employment, it was a graduate degree in tax law.
Recruited directly out of NYU by the prestigious firm Cahill Gordon & Reindel, Wadhwa navigated the grueling law associate gauntlet and later moved on to the even tonier Skadden, Arps, Slate, Meagher & Flom. The work proved intellectually challenging but soul crushing. The hours he spent helping investment banks like Merrill Lynch and Goldman Sachs design esoteric financial products to peddle to pension funds for ordinary Americans left him queasy.
Wadhwa knew his mother and father hadn’t left their comfortable life in India just so he could collect a big check protecting corporate greed. They raised him to value public service, not material wealth. Wadhwa’s uncles went to Oxford and Cambridge and then headed straight back to India to teach at Indian universities. Once he paid off his law school loans, Wadhwa was ready for a change.
Just as Rajat Gupta rode out his nine-year tenure as global managing director of McKinsey, in July 2003 Wadhwa joined the Securities and Exchange Commission in New York as a staff attorney. David Markowitz, a branch chief in New York for the SEC, introduced Wadhwa to his first case by taking him into a war room in the Woolworth Building—the SEC’s temporary digs in Lower Manhattan after 9/11. Before the terrorist attacks, the SEC was housed in the World Trade Center. Hundreds of thousands of files were destroyed in the attacks, along with accompanying cases. The windowless room in the Woolworth Building was stacked from floor to ceiling with bankers boxes containing a vast assortment of documents. Markowitz pointed around the room and said, “Someone in these seventy-two boxes is a violation.” And then he left.
Wadhwa spent two years digging through the material. But he found the perpetrator and his violation and, in April 2005, brought his first major insider trading case at the SEC. It was a complaint against a former managing director of SG Cowen, the US brokerage arm of French bank Société Générale. Another case soon followed—bigger than the last. It was the discovery of an insider trading ring involving a retired seamstress working at an underwear factory in Croatia who netted $2 million in profits on a two-day investment in Reebok International. Behind the seamstress was a cabal of Wall Streeters who were swapping information in the Winter Garden Atrium of the World Financial Center complex, where Wadhwa often went to grab a cup of coffee. It was galling to Wadhwa that insider trading was so rampant that it was happening on the SEC’s doorstep. Little did he know that the perseverance required for the Société Générale and Reebok wins was a dress rehearsal for his next case, an assignment that hit very close to home.
At 10 a.m. sharp on December 22, 2010, as he pored over the case records in his office yet again, Sanjay Wadhwa heard the ping from an email sent by one of his colleagues, Jason E. Friedman. “Just got a call from reception,” Friedman wrote. “They’re here.”
* * *
Testimony Room 419 at the SEC’s New York headquarters is a small, narrow space with yellow walls scuffed by the stacks of bankers boxes routinely pressed against them. At the corner of the room stood an American flag, and at one time, a photo of the sitting president had hung at eye level on one of the walls. But when former president George W. Bush was in power, his photo started disappearing from testimony rooms. It was not uncommon for a prominent New York lawyer with liberal leanings to tilt a rare one remaining askew. By the time President Obama took office, there were so few rooms with presidential photos that the practice fell by the wayside.
A guard showed Gupta and Naftalis and his two associates into the testimony room. Despite his rumpled appearance, Naftalis is one of the most celebrated white-collar defense attorneys in New York. The
Wall Street Journal
referred to him as “the Zelig of the white-collar bar: He’s everywhere.” He has represented everyone from former Walt Disney Company chief Michael D. Eisner to Wall Street hotshot Kenneth Langone. Like many defense lawyers, Naftalis spent six years at the US attorney’s office for the Southern District of New York (the district that made Rudy Giuliani’s career). He rose to be deputy chief of the Criminal Division before going into private practice. Naftalis had accompanied clients to interviews like this one innumerable times. He knew the script by heart and was a skilled performer inside a conference room, a pro’s pro.
A few minutes after Gupta and his legal team settled in the room, Sanjay Wadhwa, Jason Friedman, and another SEC attorney, John Henderson, entered. Wadhwa was a little taken aback to find Gupta and his lawyers already seated. Typically, the SEC attorneys arrived before the witnesses to control the order of seating. Witnesses being deposed are usually ushered to seats facing the window so they can relax and be more loquacious. Having a guard escort the group in earlier, the wily Naftalis instructed his client to sit next to him with their backs to the window.