NEW YORK – The latest issue of Desi Talk was about to be printed when news broke that Rajat Gupta, a former board member at Goldman Sachs, had been charged with insider trading.
Sunil Adam, editor of the newsweekly for Indians living in the United States, stopped the presses. It was sure to be the most talked-about story of the week. "Rajat Gupta was the first to redefine the image of Indian-Americans from cab drivers to wizards of business and finance," Adam says.
Indian executives make up a tight-knit, rarefied group in American business, populating investment banks, management consulting firms and Silicon Valley startups.
They worry that the accusations against Gupta by federal regulators of illegally passing information to a hedge fund manager before it became public, will cast a cloud over their community.
Gupta, 62, of Westport, Conn., headed the management consulting firm McKinsey & Co. from 1994 to 2003, the first non-Western executive to hold the job. He also served on the boards of several influential companies, including Goldman and Procter & Gamble.
"Rajat is an icon," says Vivek Wadhwa, a director of research at the Pratt School of Engineering at Duke University and a senior research associate at Harvard Law School. "Every community has its bad apples, but when someone as respected is implicated, it makes the entire barrel look bad."
The Securities and Exchange Commission says he passed information to Raj Rajaratnam, former head of the Galleon Group hedge funds, who himself is set to go on trial next week for insider trading. Regulators say Gupta was an investor in Galleon funds and a friend of the Sri Lankan born Rajaratnam.
At least two others in the same scandal are also Indian: Rajiv Goel, a former director of strategic investments at Intel Capital and Anil Kumar, a former director at McKinsey, who have both pleaded guilty.
Wadhwa says the scandal hits the community especially hard because Indian professionals are used to more positive portrayals. A study conducted by the University of California at Berkeley found that 15 percent of Silicon Valley startups between 1995 and 2005 were launched by Indians, the largest number for any immigrant group. Indians make up less than 1 percent of the U.S. population.
In addition, 40 percent of Indians in the United States have a master's degree, a doctorate or another professional degree, the highest of any ethnic group and five times the national average.
Gupta, the former chairman of the International Chamber of Commerce, had a powerful sphere of influence. It included former President Bill Clinton and Microsoft founder Bill Gates. In November, he was photographed shaking hands with Korean President Lee Myung-bak at the Group of 20 economic summit.
Now, though, many of Gupta's friends and close associates may be distancing themselves. The Associated Press contacted 10 board members and trustees at the America India Foundation, which Gupta helped found and does philanthropy work in India.
Only one trustee got back. Navneet Chugh, founder of California corporate law firm The Chugh Firm, said Gupta had gone out of his way to help social and charitable organizations and that he was disappointed about the charges. Others didn't return messages from the AP.
The SEC says the inside information from Gupta helped make $18 million for Rajaratnam's fund at the depths of the financial crisis in 2008. Gupta's attorney, Gary Naftalis, has called the allegations "totally baseless."
Regulators say the information included tipping Rajaratnam in September 2008 that Warren Buffett's Berkshire Hathaway was going to invest $5 billion in Goldman. Rajaratnam bought Goldman stock and sold it the next day at a $1 million profit.
Gupta could be fined and barred from serving as an officer in a public company. He remains on the board at the parent company of American Airlines and at Harman International Industries Inc., a consumer electronics company.
Since Gupta, many other Indian-born executives have reached the top, including Citigroup CEO Vikram Pandit, Pepsico CEO Indra Nooyi and Motorola's Sanjay Jha. However, Gupta's list of accomplishments was long and his reach much wider.
Orphaned at 18, Gupta joined the prestigious Indian Institute of Technology and was admitted to Harvard Business School in 1971. He has served on advisory boards of the top business schools, including Harvard and the University of Pennsylvania's Wharton School. Today he is chairman of New Silk Route Partners, a $1.4 billion private equity fund.
A new generation of Indians was particularly inspired by his role as a mentor and his philanthropic ventures. Gupta helped raise money for Pratham, a nonprofit that provides primary education for children in India, and is an adviser to Avahan, the India AIDS initiative of the Bill & Melinda Gates Foundation. He was also chair of The Global Fund to Fight Aids, Tuberculosis and Malaria.
Tushar Aggarwal, a final-year master's student at Wharton, worked at Goldman in 2003 and remembers Gupta's as willing to advise and talk philanthropy with an informal group of Indian-Americans at the investment bank.
"He focused on giving back to the community, and I look at him as someone who raised the bar for many of us pursuing an MBA," says Aggarwal, who plans on going back to his native India after he graduates from business school this year.
Aggarwal is also chair this year of the Wharton India Economic Forum, an annual conference that brings top Indian business leaders to talk about opportunities and challenges in India. Gupta has been a keynote speaker at the event. Aggarwal says he and the network of students and professionals who knew Gupta are devastated at the charges.
"The broader community is shocked and sad," says Aggarwal. "He didn't need money or access, or prestige or any favors. He was already at the pinnacle."
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