People responsible for financial crisis weren’t held accountable: Rajat Gupta

Former McKinsey boss Rajat Gupta, who lived the American Dream before he was convicted of insider trading, has written a tell-all memoir. Gupta, who spent two years in prison for sharing confidential insider information with former hedge fund manager Raj Rajaratnam, spoke to Fortune India about his book Mind Without Fear, life in prison, the history of his relationship with Sri Lankan-American Rajaratnam, his future plans, and why he maintains his innocence in the case.

Edited excerpts:

What was the idea behind writing the book? Don't you think it’s too little, too late You also cannot make any appeals any more.

I have exhausted my appeals. And at the very outset I would say this is not about relitigating the case or trying to prove my innocence. I have not spoken about this case for seven years, never said a word, never gave any interviews; I respected the judicial process. The purpose of writing the book, as I wrote in the book itself, is that I wanted to kind of write it in a way that people can relate to it. You read it, you will see pieces of yourself in it. It was also a very cathartic thing for me to do. While it was painful, it was good to write it. It brings closure to the chapter in my life. I look forward to a new chapter; most importantly, I wanted to write an interesting story.

At the very beginning of the book, you mention the case and your relationship with Raj Rajaratnam, the series of events which led to the whole case; you mention some of them as things you regret. Will you talk about your association with him?

There are many regrets but the fact that I met him and I gave him some money to invest, in hindsight you might say this was off, but he was a very highly regarded investor. My interaction with him was originally because of ISB [Indian School of Business]; he was a big donor to ISB. At that point in time I had no qualms about investing with him. I can say if I hadn’t done all that, hadn’t known him, none of this would have happened to me, but that you can say about many things in life.

My relationship with him was as a business partner, not as a friend as it was portrayed. But my real regrets are others; for example, I should have testified. I should have never gone back to the Goldman Sachs board. I had re-signed, I had got my cufflinks, given my farewell speech and they begged me to come back because of the financial crisis going on. I should not have listened. And none of this would have happened.

Do you believe you were a scapegoat when someone had to pay for what happened during the financial crisis?

The public was very angry. The crisis really hurt the public. People lost houses, people lost pension funds. The sad part is they did not hold accountable any of the people who were really responsible for it, which were the mortgage bankers, the executives; they let Lehman Brothers die, but did not hold them accountable. They never prosecuted any of these CEOs of banks. They fined the banks, [for] which the share-holders paid the money, and the executives all kept their bonuses and all their high pay. There is enormous injustice in that.

In one of the taped conversations that were played during your trial, Rajaratnam mentions paying Anil Kumar (former McKinsey executive and a friend of Gupta and Rajaratnam) a million dollars. However you say that you were unaware of it and weren't complicit in Rajaratnam's arrangement with Kumar.

You have got to understand the context of it, which was that Anil and he (Rajaratnam) were classmates and very good friends. When he said it, I am speculating, I probably didn’t even believe it, and second it wouldn’t have been unlike Raj (to give large sums of money to friends), he was a generous guy.

There is nothing in McKinsey policy (which stops you from giving advice to friends/family). If you are a friend of mine and I give you advice, you can give me whatever you think that advice is worth. Now, if you are a potential client of McKinsey and I took away an assignment, that would be a conflict, otherwise family and friends, a lot of McKinsey partners advice them, they get compensated in some way or they don’t. It isn’t against McKinsey policy.

You suggest in the book that Preet Bharara (former U.S. Attorney for the Southern District of New York) targeted you. Why do you think so?

I have no idea. In some ways I was highly visible but not at all influential or powerful, I was not a sitting CEO, I didn't have the political connections, financial connections, muscle. I was charged a week before Rajaratnam’s trial. They tried me without my ability to defend myself. Think about it this way: Rajaratnam was never tried for Goldman Sachs or Procter and Gamble. Why would they be playing tapes that had anything to do with Goldman? They didn’t charge him, they were trying to create a negative storyline about me. These were devious methods.

The prosecutors are all about winning, they are not seeking the truth. They are seeking a win.

While you were charged with insider trading, you claim there was no benefit. But what about benefit of the future?

Benefit of the future is a dubious concept. Is there a contract, is there an arrangement? That is not a legal concept. He [Rajaratnam] was taped for months, there was not a single conversation that had anything to do with inside information. I have a conversation with him about Goldman Sachs, he says ‘no, you should quit the Goldman Sachs board’. If I was an informant why would he say ‘resign’, he would say ‘stay on the board’... Every other person that he got information from, he rewarded; there was a quid pro quo. Where was the arrangement with me?

You and Rajaratnam were accused of being driven by greed. The profits that Rajaratnam made from these tips seem small to risk one’s reputation for. In that context, could you talk of insider trading?

Insider trading is a fairly vague law. The law right now is there have to be at least three conditions met: One is you have to have passed inside information, which is market-moving in-formation; second is that you should have done it with a criminal intent; the third is that there should be a quid pro quo. The fourth should be that basically there is some real tangible benefit.In my case, there is no evidence of any of it. On the first one, they had some circumstantial evidence; they in the end admitted that there was no benefit. They couldn’t prove any intent.

Let’s talk about the time you spent in prison.

I served 19 months, of which roughly eight months were in a camp, which is a low security prison. Two months were in solitary confinement and about eight months in a higher security prison. When I was going to prison, I decided that I want to take time for myself, I felt it was like going to a monastery, I thought I am going to take this time to improve myself in every way I can—physically, mentally, emotion-ally, spiritually—within the constraints I had. I walked a lot, I did a fair amount of exercise,I tried to help everybody I could, I read a fair amount, I wrote, I played a lot of games, I started a book club and a breakfast club.One advantage I had was that my sentence was two years, so I could see the end of it; there were many people who had 25-year sentences or 10-year sentences, it is very difficult for them. I also had a huge number of visitors. My family visited every week; I had 110 different people on my visitors’ list. I had a good time. I obviously won’t recommend it (laughs), but I did have a pretty good time.

What’s the plan now? How do you plan to use your experience in the future?

I just turned 70. I want to spend more time with my grandkids. But I got back involved in some of the organisations that are closest to me which I helped found, like ISB and PHFI [Pub-lic Health Foundation of India]; I have started an initiative in maternal and public health in Gujarat. I have also started doing some things on prison, justice system reforms. Then there are some nascent organisations. We formed two organisations with former inmates. I am also involved in something called The MarshallProject, which is a journalistic effort. The idea is to put the spotlight on issues of fairness, injustice in the system.

A version of this interview appeared in the April issue of the magazine.