It was stunning when the news first broke that Rajat Gupta, former head of McKinsey, and member of blue chip boards, most notably, Goldman Sachs, Proctor & Gamble, and the Bill and Melinda Gates Foundation, was charged with insider trading. Why would someone who was already rich, and more important, already had the most important commodities can buy, namely status and access, think he needed more?
Gupta has been sentenced to two years in prison, which looks light and was widely seen as a victory for the defense. It’s partly due to the case being assigned to Jed Rakoff, who has a personal war going against Federal sentencing guidelines, particularly for white collar criminals (Gupta’s sentence should have been more like eight years had they been followed.) Felix Salmon attributes it to the insurance policy of Gupta’s considerable charitable giving, which happens to be an avenue for obtaining status and access (McKinsey professionals were encouraged to serve on the boards of not-for-profits as a way of building their rolodexes). I’d hazard it’s due at least in part to the way elites (and Gupta was as elite in the business world as you can get) are subject to different rules than the rest of us. Glenn Greenwald, in his book, With Liberty and Justice for Some, traces the rationalization of shielding criminal conduct at the top level back to the pardon of Richard Nixon.
Gupta is appealing his conviction; Judge Rakoff ordered him to begin his serving his sentence on January 8, which is another bit of a break.
Contrast Gupta’s behavior with that of the highest profile conviction after America’s last financial crisis, Richard Whitney. Just as in the global financial crisis, no one who headed a major financial institution was prosecuted, but at least the Pecora Commission dug