When Rajat Gupta was found guilty of insider trading in New York on June 15th, India took notice.
The former McKinsey boss and Goldman Sachs board member was the embodiment of the American dream. Through hard work and talent, Gupta transcended his middle-class roots in Calcutta to attend Harvard Business School and become the first Indian-born chief executive of a major western firm. He also gained recognition as a devoted philanthropist and helped found a western-style management school in Hyderabad, India.
Gupta’s conviction highlights India’s growing role in world finance and the connections between Wall Street and one of the world’s largest economies. But it also shows the differences in how the two nations enforce their laws.
In America, the government has cracked down on insider trading, securing 60 guilty verdicts in the last two-and-a-half years. However, on Dalal Street— the location of the Bombay Stock Exchange — insider trading is “rampant,” according to The Times of India. Amazingly, it’s only been a crime since 1992 (the U.S. outlawed insider trading way back in 1934).
Indian regulators don’t have much power to track insider traders, either. They’re not even allowed to tap suspects’ phones. Not that it would do much good. The Times also reports that most insider trading is now done via Blackberry messages, which are impossible to trace once deleted.
But progress is being made: Indian regulators pursued 28 cases against suppliers of insider information in 2010-2011, up from ten the year before.
Some, perhaps, will see a silver lining in Gupta’s conviction, which could earn him up to 25 years in prison. The U.S. attorney who prosecuted him, Preet Bharara, was born in Punjab, and Gupta’s high-profile case has earned Bharara praise on both sides of the Pacific. The Los Angeles Times says Bharara might very well be the Elliot Ness of our age, and The Times of India suggests he could wind up as New York’s next governor.