The Galleon Group insider-trading scandal involving Raj Rajaratnam and Rajat Gupta featured arrogance, greed and, ultimately, prosecution. To Anita Raghavan, whose riveting new book tells the story in meticulous detail, that’s a sign that Indian-Americans have finally arrived.
“The South Asian diaspora in the U.S. had enjoyed unrivaled success,” she writes in “The Billionaire’s Apprentice.” “Its members were considered the new ‘model minority.’”
Then she reminds us of Israeli statesman David Ben Gurion’s observation that “in order for Israel to be counted among the nations of the world, it has to have its own burglars and prostitutes.”
The apprentice of the title is Gupta, a Shakespearean figure who rose to head global consulting firm McKinsey & Co. as a consummate politician and paragon of discretion. Yet when he stepped down he became all too eager to transcend mere wealth and achieve mega-riches.
To that end, he threw in his lot with Rajaratnam, a boorish hedge-fund manager of Sri Lankan birth whose success was due in part to a network of South Asian contacts in Silicon Valley and elsewhere. Gupta was on the board of Goldman Sachs Group Inc. (GS:US), and sometimes within minutes of leaving a confidential meeting he would telephone Rajaratnam.
The two men were partners in a separate fund -- for the most part, disastrously -- but Gupta doesn’t appear to have directly profited from any of his friend’s Goldman trades, which helped earn both men prison sentences. (Gupta is currently free while he appeals his conviction.)
Perhaps Gupta expected to profit from maintaining a good relationship with Rajaratnam; prosecutors introduced evidence that Gupta was negotiating for a stake of about 15 percent in an entity called Galleon International, a $1.3 billion Asian investment vehicle from which he could expect performance fees.
Raghavan’s tale is enlivened by a wealth of detail thanks to some impressive reporting. We learn that Gupta had at least 13 phones -- and used them all -- and that Rajaratnam held job interviews at a topless club.
“Galleon traders who made bets and lost would be required to spend the day wearing lingerie,” Raghavan notes.
The author’s Herculean labors spanned three continents, and she benefited as well from the wiretaps used by prosecutors to nail Rajaratnam. The book, which reads at times like a who’s who of the Indian-American elite, is also valuable for the glimpse it provides into a supremely successful group of immigrants -- one that, like the Jewish community before them, has triumphed through education.
Their arrival was well-timed, as Raghavan notes. The civil-rights revolution opened doors to non-white talent, and the U.S. economy’s new emphasis on finance and technology perfectly suited the training of these newcomers.
Eventually Rajaratnam and Gupta were prosecuted by a U.S. Attorney’s office headed by another Indian-American, the brilliant and ambitious Preet Bharara, whose brother, not to be outdone, sold an online business to Amazon for $540 million. Later, when Bharara visited Harvard Business School to lecture on white-collar crime, one of Gupta’s daughters was in the class.
If the book has weaknesses, they are mostly side effects of its strengths. It’s an excellent work of journalism, but Raghavan is no great prose stylist -- toward the end she refers redundantly to “a pivotal turning point” -- and at times she seems the captive of her own prodigious reporting, so that in some places readers must forge ahead snow-blind from the blizzard of details.
A larger failing is that while the book is long on facts, it’s a tad short on analysis. Raghavan has succeeded in avoiding dime-store psychologizing, yet she’s unable to provide much insight into what makes the major players tick.
In particular, why would a cultured and admired man like Gupta, one of the world’s most esteemed business leaders and already worth a fortune, take the risk of passing along nonpublic information to a coarse character like Rajaratnam?
Years before his downfall, Gupta offered a possible answer in a lecture he gave at Columbia University, where he acknowledged that, “Yeah, I am driven by money.” And he warned his listeners that they will be too: “However much you say that you will not fall into the trap of it, you do fall into the trap of it.” One hopes the students were listening.
“The Billionaire’s Apprentice: The Rise of the Indian-American Elite and the Fall of the Galleon Hedge Fund” is published by Business Plus (493 pages, $29). To buy this book in North America, click here.
(Daniel Akst writes for Muse, the arts and leisure section of Bloomberg News. The opinions expressed are his own.)
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