Goldman’s scandal-prone board

By Felix Salmon
April 15, 2010
stepped down from Goldman's board of directors last month -- the only question is why it took him so long. Galleon's Raj Rajaratnam was charged back in October, along with McKinsey director Anil Kumar; Gupta was not only the former head of McKinsey but was and is a close friend and business associate of Rajaratnam:


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It’s pretty clear now why Rajat Gupta stepped down from Goldman’s board of directors last month — the only question is why it took him so long. Galleon’s Raj Rajaratnam was charged back in October, along with McKinsey director Anil Kumar; Gupta was not only the former head of McKinsey but was and is a close friend and business associate of Rajaratnam:

Messrs. Rajaratnam and Gupta spoke frequently, and Mr. Gupta was invited to attend parties hosted by Galleon, an individual close to the situation says.

In 2006, Mr. Rajaratnam, Mr. Gupta and Mark Schwartz, a former Goldman executive, formed Taj Capital, a hedge-fund and private-equity firm focused on South Asia. The firm, since renamed New Silk Route, manages $1.4 billion in private-equity investments.

All of that alone places Gupta far too close to Rajaratnam for Goldman to be happy with Gupta on its board. But today it gets much worse: the WSJ’s Susan Pulliam reports that Gupta is being investigated for examined with respect to insider trading in Goldman shares, via his friend Raj.

What is it with Goldman and these unfortunate events surrounding its board? First there was the scandalous secret meeting with Hank Paulson in Moscow. Then there were the dubious stock transactions by Stephen Friedman. Then there was the embarrassing interview with Ruth Simmons, which was swiftly followed by her departure from the board. And now this. What can it all mean?

Update: souhaite, in the comments, reminds me of the Meg Whitman affair in 2002. And a friendly PR person emails to tell me that there’s “an important distinction” between being investigated and being examined. Gupta’s being examined, according to the WSJ, he’s not being investigated.

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