Former McKinsey & Co. partner Anil Kumar deserves probation for his role in an insider-trading scheme because of his cooperation in the prosecutions of ex- Goldman Sachs Group Inc. (GS:US) director Rajat Gupta and fund manager Raj Rajaratnam, his lawyers said.
Since he agreed to plead guilty and cooperate with the government, Kumar has given back to health institutions in the U.S. and India, including the Baylor College of Medicine in Texas and Max Institute of Healthcare Education & Research in India, his lawyer Greg Morvillo said in court papers unsealed late last night in Manhattan federal court. Kumar is scheduled to be sentenced today.
Kumar led a “law-abiding life” until he was pulled into the insider-trading scheme with Rajaratnam, Morvillo said. Rajaratnam is serving an 11-year prison sentence for securities fraud. Gupta, who was convicted of securities fraud in June, hasn’t been sentenced yet.
According to the filing, Kumar had expected to be sentenced after completing his testimony against Rajaratnam last year and was “crushed” when told he would have to give evidence against Gupta, the former head of McKinsey and Kumar’s mentor.
“He was a friend of Mr. Gupta and his family, and had held him in high esteem as the CEO of McKinsey,” Morvillo said. Kumar complied with his obligations during two days on the witness stand in the Gupta case, Morvillo said.
The testimony was “grueling,” the lawyer said, “because Anil knew that he could be partially responsible for helping to convict someone with whom he and his family had deep and long- lasting ties.”
Prosecutors have also cited Kumar’s “extraordinary” cooperation. At Rajaratnam’s trial last year, Kumar’s testimony “was nothing short of devastating,” prosecutors said July 16 in a letter to Denny Chin, the sentencing judge. In June, Kumar told a jury how Gupta teamed up with Rajaratnam, co-founder of the Galleon Group LLC hedge fund, in 2006 to try to raise $2 billion for an investment fund.
“Kumar’s cooperating with the government was absolutely essential in two of the most important securities fraud trials in history,” assistant U.S. attorneys Reed Brodsky and Richard Tarlowe said in the letter.
Few other people ensnared in the insider-trading investigation tied to Rajaratnam have cooperated with the U.S., the prosecutors said.
Kumar, who worked at McKinsey from 1986 until November 2009, pleaded guilty in January 2010 to one count of conspiracy and one count of securities fraud. Under the statutes, conspiracy is punishable by as long as five years in prison while securities fraud carries a maximum term of as long as 20 years. Kumar also agreed to pay $2.6 million in forfeiture.
Adam Smith, a former Galleon fund manager who pleaded guilty and testified against Rajaratnam, was sentenced in June to two years’ probation after prosecutors called him a “key” cooperating witness. He was sentenced by U.S. District Judge Jed Rakoff, who presided over Gupta’s case. Gupta is scheduled to be sentenced Oct. 18.
Kumar testified that Gupta approached him in 2006 saying he wanted to start an investment fund after his scheduled retirement from McKinsey in 2007. Kumar said Gupta sought out Rajaratnam, who was Kumar’s classmate at the University of Pennsylvania’s Wharton School, because of his expertise as a prominent hedge fund manager.
The case is U.S. v. Kumar, 10-cr-13, U.S. District Court, Southern District of New York (Manhattan).
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