Insider trading is the trading of a corporation's stock or other securities (e.g. bonds or stock options) by individuals with potential access to non-public information about the company. In most countries, trading by corporate insiders such as officers, key employees, directors, and large shareholders may be legal, if this trading is done in a way that does not take advantage of non-public information. However, the term is frequently used to refer to a practice in which an insider or a related party trades based on material non-public information obtained during the performance of the insider's duties at the corporation, or otherwise in breach of a fiduciary or other relationship of trust and confidence or where the non-public information was misappropriated from the company.^[1]

In the United States and several other jurisdictions, trading conducted by corporate officers, key employees, directors, or significant shareholders (in the U.S., defined as beneficial owners of ten percent or more of the firm's equity securities) must be reported to the regulator or publicly disclosed, usually within a few business days of the trade. Many investors follow the summaries of these insider trades in the hope that mimicking these trades will be profitable. While "legal" insider trading cannot be based on material non-public information, some investors believe corporate insiders nonetheless may have better insights into the health of a corporation (broadly speaking) and that their trades otherwise convey important information (e.g., about the pending retirement of an important officer selling shares, greater commitment to the corporation by officers purchasing shares, etc.)

Illegal insider trading is believed to raise the cost of capital for securities issuers, thus decreasing overall economic growth.^[2]

However, it is relatively easy for insiders to capture insider-trading like gains through the use of transactions known as "open market repurchases." Such transactions are legal and generally encouraged by regulators through safeharbours against insider trading liability. ^[3][4]

Legal insider trading[link]

Legal trades by insiders are common, as employees of publicly traded corporations often have stock or stock options. These trades are made public in the United States through Securities and Exchange Commission filings, mainly Form 4. Prior to 2001, U.S. law restricted trading such that insiders mainly traded during windows when their inside information was public, such as soon after earnings releases.^[5] SEC Rule 10b5-1 clarified that the prohibition against insider trading does not require proof that an insider actually used material nonpublic information when conducting a trade; possession of such information alone is sufficient to violate the provision, and the SEC would infer that an insider in possession of material nonpublic information used this information when conducting a trade. However, SEC Rule 10b5-1 also created for insiders an affirmative defense if the insider can demonstrate that the trades conducted on behalf of the insider were conducted as part of a pre-existing contract or written binding plan for trading in the future.^[5] For example, if an insider expects to retire after a specific period of time and, as part of his or her retirement planning, the insider has adopted a written binding plan to sell a specific amount of the company's stock every month for two years and later comes into possession of material nonpublic information about the company, trades based on the original plan might not constitute prohibited insider trading.

Illegal insider trading[link]

Rules against insider trading on material non-public information exist in most jurisdictions around the world, though the details and the efforts to enforce them vary considerably. Sections 16(b) and 10(b) of the Securities Exchange Act of 1934 directly and indirectly address insider trading. Congress enacted this act after the stock market crash of 1929. ^[6] The United States is generally viewed as having the strictest laws against illegal insider trading, and makes the most serious efforts to enforce them.^[7]

Definition of "insider"[link]

In the United States and Germany, for mandatory reporting purposes, corporate insiders are defined as a company's officers, directors and any beneficial owners of more than ten percent of a class of the company's equity securities. Trades made by these types of insiders in the company's own stock, based on material non-public information, are considered to be fraudulent since the insiders are violating the fiduciary duty that they owe to the shareholders. The corporate insider, simply by accepting employment, has undertaken a legal obligation to the shareholders to put the shareholders' interests before their own, in matters related to the corporation. When the insider buys or sells based upon company owned information, he is violating his obligation to the shareholders.

For example, illegal insider trading would occur if the chief executive officer of Company A learned (prior to a public announcement) that Company A will be taken over, and bought shares in Company A knowing that the share price would likely rise.

In the United States and many other jurisdictions, however, "insiders" are not just limited to corporate officials and major shareholders where illegal insider trading is concerned, but can include any individual who trades shares based on material non-public information in violation of some duty of trust. This duty may be imputed; for example, in many jurisdictions, in cases of where a corporate insider "tips" a friend about non-public information likely to have an effect on the company's share price, the duty the corporate insider owes the company is now imputed to the friend and the friend violates a duty to the company if he or she trades on the basis of this information.

Liability for insider trading[link]

Liability for inside trading violations cannot be avoided by passing on the information in an "I scratch your back, you scratch mine" or quid pro quo arrangement, as long as the person receiving the information knew or should have known that the information was company property. It should be noted that when allegations of a potential inside deal occur, all parties that may have been involved are at risk of being found guilty.

For example, if Company A's CEO did not trade on the undisclosed takeover news, but instead passed the information on to his brother-in-law who traded on it, illegal insider trading would still have occurred (albeit by proxy by passing it on to a "non-insider" so Company A's CEO wouldn't get his hands dirty).^[8]

Misappropriation theory[link]

A newer view of insider trading, the "misappropriation theory," is now part of US law. It states that anyone who misappropriates (steals) information from their employer and trades on that information in any stock (either the employer's stock or the company's competitor stocks) is guilty of insider trading.

For example, if a journalist who worked for Company B learned about the takeover of Company A while performing his work duties, and bought stock in Company A, illegal insider trading might still have occurred. Even though the journalist did not violate a fiduciary duty to Company A's shareholders, he might have violated a fiduciary duty to Company B's shareholders (assuming the newspaper had a policy of not allowing reporters to trade on stories they were covering).^[9]

Proof of responsibility[link]

Proving that someone has been responsible for a trade can be difficult, because traders may try to hide behind nominees, offshore companies, and other proxies. Nevertheless, the U.S. Securities and Exchange Commission prosecutes over 50 cases each year, with many being settled administratively out of court. The SEC and several stock exchanges actively monitor trading, looking for suspicious activity.

Trading on information in general[link]

Not all trading on information is illegal insider trading, however. For example: if, while dining at a restaurant, you hear the CEO of Company A at the next table telling the CFO that the company's profits will be higher than expected, and then you buy the stock, you are not guilty of insider trading unless there was some closer connection between you, the company, or the company officers. However, information about a tender offer (usually regarding a merger or acquisition) is held to a higher standard. If this type of information is obtained (directly or indirectly) and there is reason to believe it is non-public, there is a duty to disclose it or abstain from trading.^[10]

Tracking insider trades[link]

Since insiders are required to report their trades, others often track these traders, and there is a school of investing which follows the lead of insiders. This is of course subject to the risk that an insider is making a buy specifically to increase investor confidence, or making a sell for reasons unrelated to the health of the company (e.g. a desire to diversify or pay a personal expense).

American insider trading law[link]

The United States has been the leading country in prohibiting insider trading made on the basis of material non-public information. Thomas Newkirk and Melissa Robertson of the U.S. Securities and Exchange Commission (SEC) summarize the development of U.S. insider trading laws.^[11] Insider trading has a base offense level of 8, which puts it in Zone A under the U.S. Sentencing Guidelines. This means that first-time offenders are eligible to receive probation rather than incarceration.^[12]

Members of the U.S. Congress are not exempt from the laws that ban insider trading, however, they generally do not have a confidential or fiduciary relationship with the source of the information they receive and accordingly, do not meet the definition of an "insider".^[13]

Common law[link]

U.S. insider trading prohibitions are based on English and American common law prohibitions against fraud. In 1909, well before the Securities Exchange Act was passed, the United States Supreme Court ruled that a corporate director who bought that company’s stock when he knew it was about to jump up in price committed fraud by buying while not disclosing his inside information.

Section 15 of the Securities Act of 1933^[14] contained prohibitions of fraud in the sale of securities which were greatly strengthened by the Securities Exchange Act of 1934.^[15]

Section 16(b) of the Securities Exchange Act of 1934 prohibits short-swing profits (from any purchases and sales within any six month period) made by corporate directors, officers, or stockholders owning more than 10% of a firm’s shares. Under Section 10(b) of the 1934 Act, SEC Rule 10b-5, prohibits fraud related to securities trading.

The Insider Trading Sanctions Act of 1984 and the Insider Trading and Securities Fraud Enforcement Act of 1988 provide for penalties for illegal insider trading to be as high as three times the profit gained or the loss avoided from the illegal trading.^[16]

SEC regulations[link]

SEC regulation FD ("Fair Disclosure") requires that if a company intentionally discloses material non-public information to one person, it must simultaneously disclose that information to the public at large. In the case of an unintentional disclosure of material non-public information to one person, the company must make a public disclosure "promptly."^[17]

Insider trading, or similar practices, are also regulated by the SEC under its rules on takeovers and tender offers under the Williams Act.

Court decisions[link]

Much of the development of insider trading law has resulted from court decisions.

In SEC v. Texas Gulf Sulphur Co. (1966), a federal circuit court stated that anyone in possession of inside information must either disclose the information or refrain from trading.^[18]

In 1909, the Supreme Court of the United States ruled in Strong v. Repide that a director upon whose action the value of the shares depends cannot avail of his knowledge of what his own action will be to acquire shares from those whom he intentionally keeps in ignorance of his expected action and the resulting value of the shares. Even though in general, ordinary relations between directors and shareholders in a business corporation are not of such a fiduciary nature as to make it the duty of a director to disclose to a shareholder the general knowledge which he may possess regarding the value of the shares of the company before he purchases any from a shareholder, yet there are cases where, by reason of the special facts, such duty exists.

In 1984, the Supreme Court of the United States ruled in the case of Dirks v. SEC that tippees (receivers of second-hand information) are liable if they had reason to believe that the tipper had breached a fiduciary duty in disclosing confidential information and the tipper received any personal benefit from the disclosure. (Since Dirks disclosed the information in order to expose a fraud, rather than for personal gain, nobody was liable for insider trading violations in his case.)

The Dirks case also defined the concept of "constructive insiders," who are lawyers, investment bankers and others who receive confidential information from a corporation while providing services to the corporation. Constructive insiders are also liable for insider trading violations if the corporation expects the information to remain confidential, since they acquire the fiduciary duties of the true insider.

In United States v. Carpenter (1986) the U.S. Supreme Court cited an earlier ruling while unanimously upholding mail and wire fraud convictions for a defendant who received his information from a journalist rather than from the company itself. The journalist R. Foster Winans was also convicted, on the grounds that he had misappropriated information belonging to his employer, the Wall Street Journal. In that widely publicized case, Winans traded in advance of "Heard on the Street" columns appearing in the Journal.^[19]

The court ruled in Carpenter: "It is well established, as a general proposition, that a person who acquires special knowledge or information by virtue of a confidential or fiduciary relationship with another is not free to exploit that knowledge or information for his own personal benefit but must account to his principal for any profits derived therefrom."

However, in upholding the securities fraud (insider trading) convictions, the justices were evenly split.

In 1997 the U.S. Supreme Court adopted the misappropriation theory of insider trading in United States v. O'Hagan, 521 U.S. 642, 655 (1997). O'Hagan was a partner in a law firm representing Grand Metropolitan, while it was considering a tender offer for Pillsbury Co. O'Hagan used this inside information by buying call options on Pillsbury stock, resulting in profits of over $4 million. O'Hagan claimed that neither he nor his firm owed a fiduciary duty to Pillsbury, so that he did not commit fraud by purchasing Pillsbury options.^[20]

The Court rejected O'Hagan's arguments and upheld his conviction.

The "misappropriation theory" holds that a person commits fraud "in connection with" a securities transaction, and thereby violates 10(b) and Rule 10b-5, when he misappropriates confidential information for securities trading purposes, in breach of a duty owed to the source of the information. Under this theory, a fiduciary's undisclosed, self-serving use of a principal's information to purchase or sell securities, in breach of a duty of loyalty and confidentiality, defrauds the principal of the exclusive use of the information. In lieu of premising liability on a fiduciary relationship between company insider and purchaser or seller of the company's stock, the misappropriation theory premises liability on a fiduciary-turned-trader's deception of those who entrusted him with access to confidential information.

The Court specifically recognized that a corporation’s information is its property: "A company's confidential information...qualifies as property to which the company has a right of exclusive use. The undisclosed misappropriation of such information in violation of a fiduciary duty...constitutes fraud akin to embezzlement – the fraudulent appropriation to one's own use of the money or goods entrusted to one's care by another."

In 2000, the SEC enacted Rule 10b5-1, which defined trading "on the basis of" inside information as any time a person trades while aware of material nonpublic information – so that it is no defense for one to say that she would have made the trade anyway. This rule also created an affirmative defense for pre-planned trades.

Insider trading by members of Congress[link]

Members of Congress are exempted from insider trading laws and thus can act on information they are bound to gain in the course of their congressional activities, although house rules ^[21] may consider it unethical. A 2004 study found that stock sales and purchases by Senators outperformed the market by 12.3% per year.^{[citation needed]} Peter Schweizer points out several examples of insider trading by members of Congress, including action taken by Spencer Bachus following a private, behind-the-doors meeting on the evening of September 18, 2008 when Hank Paulson and Ben Bernanke informed members of Congress about the imminent financial crisis, Bachus then shorted stocks the next morning and cashed in his profits within a week.^[22] Also attending the same meeting were Senator Dick Durbin and John Boehner; the same day (trade effective the next day), Durbin sold mutual-fund shares worth $42,696, and reinvested it all with Warren Buffett. Also the same day (trade effective the next day), Congressman Boehner cashed out of an equity mutual fund.^[23][24]

Security analysis and insider trading[link]

Security analysts gather and compile information, talk to corporate officers and other insiders, and issue recommendations to traders. Thus their activities may easily cross legal lines if they are not especially careful. The CFA Institute in its code of ethics states that analysts should make every effort to make all reports available to all the broker's clients on a timely basis. Analysts should never report material nonpublic information, except in an effort to make that information available to the general public. Nevertheless, analysts' reports may contain a variety of information that is "pieced together" without violating insider trading laws, under the Mosaic theory.^[25] This information may include non-material nonpublic information as well as material public information, which may increase in value when properly compiled and documented.

In May 2007, a bill entitled the "Stop Trading on Congressional Knowledge Act, or STOCK Act" was introduced that would hold congressional and federal employees liable for stock trades they made using information they gained through their jobs and also regulate analysts or "Political Intelligence" firms that research government activities.^[26] The bill has not passed.^[27]

Arguments for legalizing insider trading[link]

Some economists and legal scholars (e.g. Henry Manne, Milton Friedman, Thomas Sowell, Daniel Fischel, Frank H. Easterbrook) argue that laws making insider trading illegal should be revoked. They claim that insider trading based on material nonpublic information benefits investors, in general, by more quickly introducing new information into the market.^[28]

Milton Friedman, laureate of the Nobel Memorial Prize in Economics, said: "You want more insider trading, not less. You want to give the people most likely to have knowledge about deficiencies of the company an incentive to make the public aware of that." Friedman did not believe that the trader should be required to make his trade known to the public, because the buying or selling pressure itself is information for the market.^[29]

Other critics argue that insider trading is a victimless act: A willing buyer and a willing seller agree to trade property which the seller rightfully owns, with no prior contract (according to this view) having been made between the parties to refrain from trading if there is asymmetric information. The Atlantic has described the process as "arguably the closest thing that modern finance has to a victimless crime".^[30]

Legalization advocates also question why "trading" where one party has more information than the other is legal in other markets, such as real estate, but not in the stock market. For example, if a geologist knows there is a high likelihood of the discovery of petroleum under Farmer Smith's land, he may be entitled to make Smith an offer for the land, and buy it, without first telling Farmer Smith of the geological data.^[18] Nevertheless, circumstances can occur when the geologist would be committing fraud if, because he owes a duty to the farmer, he did not disclose the information; e.g., if he had been hired by Farmer Smith to assess the geology of the farm.

Advocates of legalization make free speech arguments. Punishment for communicating about a development pertinent to the next day's stock price might seem to be an act of censorship.^[31] If the information being conveyed is proprietary information and the corporate insider has contracted to not expose it, he has no more right to communicate it than he would to tell others about the company's confidential new product designs, formulas, or bank account passwords.

There are very limited laws against "insider trading" in the commodities markets, if, for no other reason, than that the concept of an "insider" is not immediately analogous to commodities themselves (e.g., corn, wheat, steel, etc.). However, analogous activities such as front running are illegal under U.S. commodity and futures trading laws. For example, a commodity broker can be charged with fraud if he or she receives a large purchase order from a client (one likely to affect the price of that commodity) and then purchases that commodity before executing the client's order in order to benefit from the anticipated price increase.

Legal differences among jurisdictions[link]

The US and the UK vary in the way the law is interpreted and applied with regard to insider trading.

In the UK, the relevant laws are the Criminal Justice Act 1993 Part V Schedule 1 and the Financial Services and Markets Act 2000, which defines an offence of Market Abuse.^[32] It is also illegal to fail to trade based on inside information (whereas without the inside information the trade would have taken place). The principle is that it is illegal to trade on the basis of market-sensitive information that is not generally known. No relationship to the issuer of the security is required; all that is required is that the guilty party traded (or caused trading) whilst having inside information.

Japan enacted its first law against insider trading in 1988. Roderick Seeman says: "Even today many Japanese do not understand why this is illegal. Indeed, previously it was regarded as common sense to make a profit from your knowledge."^[33]

In accordance with EU Directives, Malta enacted the Financial Markets Abuse Act in 2002, which effectively replaced the Insider Dealing and Market Abuse Act of 1994.

The "Objectives and Principles of Securities Regulation"^[34] published by the International Organization of Securities Commissions (IOSCO) in 1998 and updated in 2003 states that the three objectives of good securities market regulation are (1) investor protection, (2) ensuring that markets are fair, efficient and transparent, and (3) reducing systemic risk. The discussion of these "Core Principles" state that "investor protection" in this context means "Investors should be protected from misleading, manipulative or fraudulent practices, including insider trading, front running or trading ahead of customers and the misuse of client assets." More than 85 percent of the world's securities and commodities market regulators are members of IOSCO and have signed on to these Core Principles.

The World Bank and International Monetary Fund now use the IOSCO Core Principles in reviewing the financial health of different country's regulatory systems as part of these organization's financial sector assessment program, so laws against insider trading based on non-public information are now expected by the international community. Enforcement of insider trading laws varies widely from country to country, but the vast majority of jurisdictions now outlaw the practice, at least in principle.

Larry Harris claims that differences in the effectiveness with which countries restrict insider trading help to explain the differences in executive compensation among those countries. The U.S., for example, has much higher CEO salaries than do Japan or Germany, where insider trading is less effectively restrained.^[35]

By nation[link]

Norway[link]

In 2009, a journalist in Nettavisen (Thomas Gulbrandsen) was sentenced to 4 months in prison for insider trading.^[36]

The longest prison sentence in a Norwegian trial where the main charge was insider trading, was for 8 years (where 2 of the years are suspended) when Alain Angelil was convicted in a district court on December 9, 2011.^[37]

See also[link]

• Abuse of information
• Efficient market hypothesis
• ImClone stock trading case
• Eugene Plotkin
• Private Securities Litigation Reform Act
• Raj Rajaratnam
• Rene Rivkin
• Securities fraud
• Securities Regulation in the United States

Notes[link]

References[link]

• Stephen M. Bainbridge, Securities Law: Insider Trading (1999) ISBN 1-56662-737-0.
• Larry Harris, Trading & Exchanges, Oxford Press, Oxford, 2003. Chapter 29 "Insider Trading" ISBN 0-19-514470-8.
• Grechenig, The Marginal Incentive of Insider Trading: an Economics Reinterpretation of the Case Law, 37 The University of Memphis Law Review 75-148 (2006).
• Review of Financial Studies; May2009, Vol. 22 Issue 5, p1845-1887, 43p
• Grechenig, Positive and Negative Information - Insider Trading Rethought,

External links[link]

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Look up insider trading in Wiktionary, the free dictionary.

General information

• Insider Trading Informational page from the U.S. Security and Exchange Commission (SEC)
• Testimony Concerning Insider Trading, by Linda Thomsen, Director of the SEC's Division of Enforcement, before the U.S. Senate Judicial Committee (September 26, 2006)
• SEC Forms 3, 4 and 5
• Insider Trading: Information on Bounties

Articles and opinions

• Timothy Sullivan We're still against fraud, aren't we? United States v. O'Hagan: Trimming the Oak in the wrong season St. John's Law Review, Winter 1997.
• An opinion on Why Insider Trading Should be Legal Larry Elder Interviews Henry Manne
• Why forbid insider trading? by Ajay Shah, consultant to the Ministry of Finance, India
• Information, Privilege, Opportunity and Insider Trading by Robert W. Mcgee and Walter E. Block – a scholarly work that opposes regulations against insider trading
• Free Samuel Waksal argues that businessman's insider trading should not be considered a crime
• Rule: Ownership Reports and Trading by Officers, Directors and Principal Security

Data on insider trading

• SEC Edgar Database on current Form 3, Form 4 and Form 5 filings

John Stossel
John Stossel outside Fox Studios after a taping of Stossel, June 9, 2010.
Born	John F. Stossel (1947-03-06) March 6, 1947 (age 65) Chicago Heights, Illinois, U.S.
Education	B.A. in Psychology, Princeton University (1969)
Occupation	Journalist, author, columnist, reporter, TV presenter
Years active	1969–present[1]
Notable credit(s)	20/20 Stossel
Spouse	Ellen Abrams
Website
http://www.johnstossel.com/

John F. Stossel (born March 6, 1947) is an American consumer reporter, investigative journalist, author and libertarian columnist. In October 2009 Stossel left his long time home on ABC News to join the Fox Business Channel and Fox News Channel, both owned and operated by News Corp. He hosts a weekly news show on Fox Business, Stossel, which debuted on December 10, 2009. The show airs in prime time every Thursday, repeating on both Saturdays and Sundays. Stossel also regularly provides signature analysis, appearing on various Fox News shows, including weekly appearances on The O'Reilly Factor, in addition to writing the Fox News Blog, "John Stossel's Take".^[2]

Stossel practices advocacy journalism, often challenging conventional wisdom.^[3] His reporting style, which is a blend of commentary and reporting, reflects a libertarian political philosophy and his views on economics are largely supportive of the free market.^[4]

In his decades as a reporter, Stossel has received numerous honors and awards, including nineteen Emmy awards and has been honored five times for excellence in consumer reporting by the National Press Club.^[5] John Stossel is doctor honoris causa from Universidad Francisco Marroquín.^[6] Stossel has written two books recounting how his experiences in journalism shaped his socioeconomic views, Give Me a Break in 2004 and Myths, Lies, and Downright Stupidity in 2007.

Stossel began his journalism career as a researcher for KGW-TV and later became a consumer reporter at WCBS-TV in New York City, before joining ABC News as a consumer editor and reporter on Good Morning America. Stossel went on to be an ABC News correspondent, joining the weekly news magazine program 20/20, going on to become co-anchor.^[7]

ABC is reported to believe "his reporting goes against the grain of the established media and offers the network something fresh and different...[but] makes him a target of the groups he offends."^[8]

Early life[link]

John Stossel was born in Chicago Heights, Illinois, the younger of two sons,^[9] to a prominent Jewish family, and graduated from New Trier High School in Winnetka. He overcame a stuttering problem so he could become a reporter, and is now a supporter and advocate for the Stuttering Foundation of America. Stossel graduated from Princeton University with a BA in Psychology in 1969 and was a member of Princeton Tower Club while there. He began his journalism career as a researcher for KGW-TV in Portland, Oregon. Stossel later became a consumer reporter at WCBS-TV in New York City before joining ABC News in 1981 as consumer editor and reporter on Good Morning America.

Career[link]

[edit] 20/20

Stossel was named co-anchor of ABC News' 20/20 in May 2003. He joined the weekly news magazine program in 1981, initially as a correspondent. His "Give Me a Break" segments featured a skeptical look at subjects from government regulations and pop culture to censorship and unfounded fear. The series was spun off into a series of one-hour specials (which, Stossel stated in an interview with ReasonTV^[10] cost ABC half a million dollars per special), beginning in 1994, with titles including:

• "Give Me a Break" – regular segment
• You Can't Even Talk About It – 2009^[11]
• Bailouts and Bull (in association with ReasonTV) – 2009
• Age of Consent – 2009
• John Stossel's Politically Incorrect Guide to Politics – 2008
• Sex in America – 2008
• Sick in America, Whose Body Is It Anyway? – 2007
• Cheap In America – 2007
• Myths, Lies and Downright Stupidity – 2007
• Cheap in America – 2006
• Stupid in America: How We Cheat Our Kids – 2006^[12]
• Privilege in America: Who's Shutting You Out? – 2006
• War on Drugs: A War on Ourselves – 2002
• Freeloaders – 2001
• John Stossel Goes to Washington – Spring 2001
• Is America #1? – 1999
• Greed – 1999
• Common Sense – 1995
• Are We Scaring Ourselves to Death?
• Junk Science: What You Know That May Not Be So
• Boys and Girls Are Different
• You Can't Say That!
• The Power of Belief

Fox News Channel and Fox Business Network[link]

In September 2009, it was announced that Stossel was leaving ABC News and joining Fox News Channel and Fox Business Network. In addition to appearing on The O'Reilly Factor every Tuesday night, he now hosts a one-hour weekly program for Fox Business Network and a series of one-hour specials for Fox News Channel, as well as making regular guest appearances on Fox News programs.

The program, entitled Stossel, debuted December 10, 2009, on Fox Business Network. The program looks at consumer-focused topics, such as civil liberties, the business of health care, and free trade. His blog, "Stossel’s Take", is published on both FoxBusiness.com and FoxNews.com.^[13][14][15]

Publications[link]

Stossel has written three books. Give Me a Break: How I Exposed Hucksters, Cheats, and Scam Artists and Became the Scourge of the Liberal Media is a 2005 autobiography from Harper Perennial documenting his career and philosophical transition from liberalism to libertarianism. It describes his opposition to government regulation, his belief in free market and private enterprise, support for tort reform, and advocacy for shifting social services from the government to private charities. It was a New York Times bestseller for 11 weeks.^[3] Myths, Lies, and Downright Stupidity: Get Out the Shovel – Why Everything You Know Is Wrong, which was published in 2007 by Hyperion, questions the validity of various conventional wisdoms, and argues that the belief he is conservative is untrue. On April 10, 2012, Threshold Editions, an imprint of Simon & Schuster, published Stossel's third book No, They Can't: Why Government Fails-But Individuals Succeed. It argues that government policies meant to solve problems instead produce new ones, and that free individuals and the private sector perform tasks more efficiently than the government does.^[16]

With financial support from the libertarian Palmer R. Chitester Fund, Stossel and ABC News launched a series of educational materials for public schools in 1999 entitled "Stossel in the Classroom".^[17][18] It was taken over in 2006 by the Center for Independent Thought and releases a new DVD of teaching materials annually. In 2006, Stossel and ABC released Teaching Tools for Economics, a video series based on the National Council of Economics Education standards.^[19]

Charity and other work[link]

Stossel often makes public appearances and speeches, advocating his brand of libertarian thought.^[20] Stossel explained at the end of the December 30, 2010 episode of Stossel that he gives away his earnings from these engagements to charity; they contribute 25% of his income. The three main groups he supports with his donations are the The Doe Fund, the Central Park Conservancy (on whose board he sits), and Student Sponsor Partners (SSP), which partners low-income high school students with donors who mentor the students and pay tuition for the students to attend private school (usually Catholic schools), which Stossel says have higher graduation rates than public schools.^[21]

Stossel and his former ABC News colleague Chris Cuomo are silent investors in Columbus Tavern, a restaurant on Columbus Avenue at 72nd Street on Manhattan's Upper West Side.^[22][23][24]

Political and personal beliefs[link]

Contrarianism[link]

Stossel's news reports and writings attempt to debunk popular beliefs. His Myths and Lies series of 20/20 specials challenges a range of widely held beliefs. He also hosted The Power of Belief (October 6, 1998), an ABC News Special that focused on assertions of the paranormal and people's desire to believe. Another report outlined the belief that opposition to DDT is misplaced and that the ban on DDT has resulted in the deaths of millions of children,^[25] mostly in poor nations.^[26]

Libertarianism[link]

Stossel speaking at the Free State Project's New Hampshire Liberty Forum.

As a libertarian, Stossel says that he believes in both personal freedom^[27] and the free market. He frequently uses television airtime to advance these views and challenge viewers' distrust of free market capitalism and economic competition. He received an Honoris Causa Doctorate from Francisco Marroquin University, a libertarian university in Guatemala, in 2008. He told The Oregonian, on October 26, 1994:

I started out by viewing the marketplace as a cruel place, where you need intervention by government and lawyers to protect people. But after watching the regulators work, I have come to believe that markets are magical and the best protectors of the consumer. It is my job to explain the beauties of the free market.^[28]

I'm a little embarrassed about how long it took me to see the folly of most government intervention. It was probably 15 years before I really woke up to the fact that almost everything government attempts to do, it makes worse.^[29]

Stossel argues that personal greed creates an incentive to work and to innovate.^[30] He has promoted school choice as a way to improve American schools, because he believes that when people are given a choice, they will choose the better schools for their children.^[31] Referring to educational tests that rank American students lower than others he says:

The people who run the international tests told us, "the biggest predictor of student success is choice." Nations that "attach the money to the kids" and thereby allow parents to choose between different public and private schools have higher test scores. This should be no surprise; competition makes us better.^[32]

Stossel has criticized government programs as inefficient, wasteful, and harmful.^[33] He has also criticized the American legal system, opining that it provides lawyers and vexatious litigators the incentive to file frivolous lawsuits indiscriminately, which Stossel contends often generate more wealth for lawyers than deserving clients, stifle innovation and personal freedoms, and cause harm to private citizens, taxpayers, consumers and businesses.^[34] Although Stossel concedes that some lawsuits are necessary in order to provide justice to people genuinely injured by others with greater economic power,^[35] he advocates the adoption in the U.S. of the English rule as one method to reduce the more abusive or frivolous lawsuits.^[36]

Stossel opposes corporate welfare, bailouts^[37] and the war in Iraq.^[5] He also opposes legal prohibitions against pornography, marijuana, gambling, ticket scalping, prostitution, homosexual activity, and assisted suicide,^[38] and believes most abortions should be legal.^[39] He favors replacing the income tax with the FairTax.^[40]

When President Barack Obama altered federal guidelines in April 2010 governing the employment of unpaid interns under the Fair Labor Standards Act,^[41] Stossel criticized the guidelines, appearing in a police uniform during an appearance on the Fox News program America Live, commenting, "I’ve built my career on unpaid interns, and the interns told me it was great – I learned more from you than I did in college." Asked why he did not pay them if they were so valuable, he said he could not afford to.^[42]

Regarding religion, Stossel identified himself as an agnostic in the December 16, 2010 episode of Stossel, explaining that he had no belief in God, but was open to the possibility.^[43]

Praise and criticism[link]

Awards[link]

Stossel has won 19 Emmy Awards. He was honored five times for excellence in consumer reporting by the National Press Club, and has received the George Polk Award for Outstanding Local Reporting and the Peabody Award. In one year, according to Stossel in his book Give Me A Break, "I got so many Emmys, another winner thanked me in his acceptance speech 'for not having an entry in this category'".^[44] According to Stossel, when he was in favor of government intervention and skeptical of business he was deluged with awards, but in 2006 he stated, "They like me less... Once I started applying the same skepticism to government, I stopped winning awards."^[29] On April 23, 2012, Stossel was awarded the Chapman University Presidential Medal, by the current president, James Doti, and chancellor, Danielle Struppa. The award has only been presented to a handful of people over the past 150 years. ^[45]

Praise[link]

The Nobel Prize–winning Chicago School monetarist economist Milton Friedman lauded Stossel, stating: "Stossel is that rare creature, a TV commentator who understands economics, in all its subtlety."^[46] Steve Forbes, the editor of Forbes Magazine, described Stossel as riveting and "one of America’s ablest and most courageous journalists."^[46] P. J. O'Rourke, best-selling author of Eat the Rich and Parliament of Whores praised Stossel, stating:

... about John Stossel's fact-finding. He seeks the truths that destroy truisms, wields reason against all that's unreasonable, and ... puncture(s) sanctimonious idealism.... He makes the maddening mad. And Stossel’s tales of the outrageous are outrageously amusing.^[46]

An article published by the libertarian group Advocates for Self Government notes praise for Stossel.^[47] Independent Institute Research Analyst Anthony Gregory, writing on the libertarian blog, LewRockwell.com, described Stossel as a "heroic rogue... a media maverick and proponent of freedom in an otherwise statist, conformist mass media."^[48] Libertarian investment analyst Mark Skousen said Stossel is "a true libertarian hero".^[49]

Criticism and controversy[link]

Watchdog groups[link]

Liberal media organizations such as Fairness and Accuracy In Reporting (FAIR) and Media Matters for America (MMfA), have criticized Stossel's work,^[50][51] for what was perceived by those groups as a lack of balance of coverage and distortion of facts. For example, Stossel was criticized for a segment on his October 11, 1999, show during which he argued that AIDS research has received too much funding, "25 times more than on Parkinson's, which kills more people." FAIR responded that, "In fact, AIDS killed more than 16,000 people in the United States in 1999," whereas Parkinson's averaged "a death toll in the United States of less than 4,000 per year."^[52]

However, the Centers for Disease Control National Vital Statistics Reports do not support FAIR's claim. The CDC reported that HIV/AIDS killed 14,802 Americans in 1999, compared to 14,593 who succumbed to Parkinson's.^[53] The following year the order was reversed, with 14,478 dying from HIV/AIDS, and 15,682 from Parkinson's.^[54]

Accusation of conflict of interest[link]

In a February 2000 Salon.com feature on Stossel entitled "Prime-time propagandist", David Mastio wrote that Stossel has a conflict of interest in donating profits from his public speaking engagements to, among others, a non-profit called "Stossel in the Classroom" which includes material for use in schools, some of which uses material made by Stossel.^[55][56]

Galbraith and Stossel[link]

University of Texas economist James K. Galbraith has alleged that Stossel in his September 1999 special, Is America #1?, used an out of context clip of Galbraith to convey the notion that Galbraith advocated the adoption by Europe of the free market economics practiced by the United States, when in fact, Galbraith actually advocated that Europe adopt some of the United States' social benefit transfer mechanisms such as Social Security, which is the economically opposite view. Stossel denied any misrepresentation of Galbraith's views, and stated that it was not his intention to convey that Galbraith agreed with all of the special's ideas, but re-edited that portion of the program for its September 2000 repeat, in which Stossel paraphrased, "Even economists who like Europe's policies, like James Galbraith, now acknowledge America's success."^[57][58][59]

Organic vegetables[link]

A February 2000 story about organic vegetables on 20/20 included statements by Stossel that tests had shown that neither organic nor conventional produce samples contained any pesticide residue, and that organic food was more likely to be contaminated by E. coli bacteria. The Environmental Working Group objected to his report, mainly questioning his statements about bacteria, but also managed to determine that the produce had never been tested for pesticides. They communicated this to Stossel, but after the story's producer backed Stossel's recollection that the test results had been as described, the story was rebroadcast months later, uncorrected, and with a postscript in which Stossel reiterated his claim. Later, after a report in The New York Times confirmed the Environmental Working Group's claims, ABC News suspended the producer of the segment for a month and reprimanded Stossel. Stossel apologized, saying that he had thought the tests had been conducted as reported. However, he asserted that the gist of his report had been accurate.^{[60][61][62][63][64]}

Frederick K. Price[link]

In a March 2007 segment about finances and lifestyles of televangelists, 20/20 aired a clip of Rev. Frederick K. Price, a TV minister, that was originally broadcast by the Lifetime Network in 1997. Price alleged that the clip portrayed him describing his wealth in extravagant terms, when he was actually telling a parable about a rich man. ABC News twice aired a retraction and apologized for the error.^[65][66] In August 2010, a lower court's dismissal of the minister's defamation suit against ABC, Price v. Stossel, was overturned by the U.S. 9th Circuit Court of Appeals.^[67]

"Sick Sob Stories"[link]

In an opinion piece published in The Wall Street Journal in September 2007 called "Sick Sob Stories", Stossel described the case of Tracy and Julie Pierce that was explored in Michael Moore's film, Sicko.^[68] Julie Pierce criticized Stossel, saying her husband would have been saved by the Canadian health care system, and she thought Stossel should have interviewed her and her doctor before writing about them.^[69] Stossel expressed sympathy, but said she had been misled to believe the treatment was routinely available in Canada. He said that the treatment is also considered "experimental" in Canada, and is provided there even more rarely than in the U.S.^[70]

Global warming[link]

He challenges the notion that man-made global warming would have net negative consequences, pointing to assertedly warmer periods in human history.^[71] Central to his argument is the idea that groups and individuals get much more public attention, donations, and government funding when they proclaim "this will be terrible" than groups that say "this is nothing to worry about." He points to groups like the World Wildlife Fund, Greenpeace, the Environmental Defense Fund, the Natural Resources Defense Council, and to activists such as Rachel Carson and former U.S. Vice President Al Gore as examples of environmental scaremongers.^[72]

In 2001, the media watchdog organization Fairness and Accuracy in Reporting criticized Stossel's reportage of global warming in his documentary, Tampering with Nature, for using "highly selective...information" that gave "center stage to three dissenters from among the 2,000 members of the UN's Intergovernmental Panel on Climate Change, which recently released a report stating that global temperatures are rising almost twice as fast as previously thought."^[73]

In a 2006 discussion hosted by the Fraser Institute, Stossel stated that he accepts that global warming has occurred in the past century, that it has been about one degree Celsius, and that man-made emissions "may be part of the cause." Nevertheless he groups environmental groups with astrologers and psychics in his second book, Myths, Lies and Downright Stupidity. He stated that the "myths" come in with the debate about proposed solutions to reduce global warming, which he argues will not solve the problem at all and will restrict people's freedom.^[5]

David Schultz incident[link]

On December 28, 1984, during an interview for 20/20 on professional wrestling, wrestler David Schultz struck Stossel after Stossel stated that he thought professional wrestling was "fake". Stossel stated that he suffered from pain and buzzing in his ears eight weeks after the assault.^[74] Stossel sued and obtained a settlement of $425,000 from the World Wrestling Federation (WWF). In his book, Myths, Lies, and Downright Stupidity, he writes that he has come to regret doing so, having adopted the belief that lawsuits harm hundreds of innocent people.^[75][76] Schultz maintains that he attacked Stossel on orders from Vince McMahon, the head of the then-WWF.^[77]

Personal life[link]

Stossel lives in New York City with his wife, Ellen Abrams. They have two grown children.^[78]

Stossel's older brother, Thomas P. Stossel,^[9] is a hematologist at Brigham and Women's Hospital,^[79] and a professor at Harvard Medical School. He has served on the advisory boards of Merck, Biogen Idec and Dyax,^[80] as a senior fellow at the free-market Manhattan Institute,^[81] and as a trustee of the American Council on Science and Health.^[82]

Stossel's nephew is the journalist and magazine editor Scott Stossel.^[83]

See also[link]

• List of newspaper columnists

References[link]

Further reading[link]

External links[link]

Wikiquote has a collection of quotations related to: John Stossel

• Official website
• John Stossel at the Internet Movie Database
• Harper Collins (Publisher) – Biography at Publisher's website
• American Justice Partnership (December 12, 2005). "Special Interview...Steve Hantler (of) John Stossel" (17 minute MP3 audio). http://www.legalreforminthenews.com/Interviews/Stossel_Hantler_Interview.html. Retrieved October 14, 2007. 

Biographies and articles about Stossel[link]

• ABC News Biography
• Johnson, Peter. "Stossel's evolution from activist to contrarian angers some of his fans", USA Today, April 30, 2006
• "John Stossel: Myth-Buster", FrontPageMag.com
• Sullum, Jacob. "Risky Journalism: ABC's John Stossel bucks a fearful establishment" Reason, April 1997.

Articles by Stossel[link]

• John Stossel's 20/20 Web Page
• John Stossel's Newspaper Columns
• John Stossel's contributions to Reason Magazine
• "Confessions of a Welfare Queen: How rich bastards like me rip off taxpayers for millions of dollars" is an excerpt from his first book.
• John Stossel's Column on Creators.com

Rajat Gupta
Rajat Gupta at the World Economic Forum, Davos, 2010
Born	Rajat Kumar Gupta (1948-12-02) 2 December 1948 (age 63) Kolkata, West Bengal, India
Residence	Westport, CT, USA New York, NY, USA Colorado, USA Palm Island, FL, USA
Citizenship	United States
Alma mater	IIT Delhi Harvard Business School
Occupation	Consultant, Management expert
Years active	1973-2007
Employer	McKinsey & Company, Inc.
Net worth	$100 million+ [1]
Title	Senior Partner Emeritus and former Worldwide Managing Director
Term	1994-2003 (Managing director)
Predecessor	Fred Gluck
Successor	Ian Davis
Religion	Hindu[2]
Spouse	Anita Mattoo Gupta
Children	4

Rajat Kumar Gupta (RA-jat ku-MAAR GUP-ta; Bengali: রজত গুপ্ত; born 2 December 1948) is an Indian American businessman who was the managing director (chief executive) of management consultancy McKinsey & Company from 1994 to 2003 and a business leader in India and the United States. He was arrested in late 2011 by the FBI on insider trading charges stemming from the Raj Rajaratnam Galleon Group case and is on criminal trial as of May 2012.

In his capacity at McKinsey, Gupta was recognized as the first Indian-born CEO of a global corporation. After retiring from active practice, while maintaining an affiliation at McKinsey, Gupta served as corporate chairman, board director or strategic advisor to a variety of large and notable organizations (full list): corporations including Goldman Sachs, Procter and Gamble and American Airlines, and non-profits including The Gates Foundation, The Global Fund and the International Chamber of Commerce. Rajat Gupta is additionally the co-founder of four different organizations: the Indian School of Business with Anil Kumar, the American India Foundation with Victor Menezes and Lata Krishnan, New Silk Route with Parag Saxena and Menezes again, and Scandent with Ramesh Vangal.

Early life and education[link]

Rajat Gupta was born in Kolkata, India to Pran Kumari Gupta and Ashwini Kumar Gupta. His father was a journalist for Ananda Publishers. His father was a prominent freedom fighter and had been jailed by the British for his efforts. His mother taught at a Montessori school. Gupta had three siblings.

When Gupta was five the family moved to New Delhi, where his father went to start the newspaper Hindustan Standard. Gupta's father died when Gupta was sixteen; Gupta's mother died two years later. Now an orphan, Gupta and his siblings "decided to live by ourselves. It was pretty unusual in those days."^[3]

He was a student at Modern School in New Delhi. After high school, Gupta ranked 15th in the nation in the entrance exam for the Indian Institutes of Technology. He received a Bachelor of Technology degree in Mechanical Engineering from the Indian Institute of Technology, Delhi (IIT-D) in 1971. Declining a job from the prestigious domestic firm ITC Limited, he received an MBA from Harvard Business School (HBS) in 1973, where he was named a Baker Scholar.^[4] Gupta remarked that the first time he saw an airplane was when he flew to ITC to inform them he would be attending HBS.^[3]

Career[link]

McKinsey & Company[link]

Gupta joined McKinsey & Company in 1973 as one of the earliest Indian-Americans at the consultancy. He was initially rejected because of inadequate work experience, a decision that was overturned after his Harvard Business School professor Walter J. Salmon called Ron Daniel, then head of the New York office and later also the managing director of McKinsey, on Gupta's behalf.^[3]

Gupta began his career in New York before moving to Scandinavia to became the head of McKinsey offices there in 1981. He did well in what was then considered a "backwater" area; this is where he first made his mark.^[5] Elected senior partner in 1984, he became head of the Chicago office in 1990. In 1994 he was elected the firm's first managing director (chief executive) born outside of the US, and re-elected twice in 1997 and 2000. In this capacity, he was considered the first Indian-born CEO of a multinational organization.

During Gupta's time as head of McKinsey, the firm opened offices in 23 new countries and doubled its consultant base.^[6] His successor Ian Davis was elected by "emphasizing the need for a return to the McKinsey heritage".^[7] This was seen as a reaction against Gupta's aggressive firm expansion. It was also a time of perceived shifting of standards. Enron, closely identified with McKinsey, collapsed during Gupta's tenure. During the dot-com bubble he and Anil Kumar created a program for McKinsey to accept payment from its clients in stock. Gupta's accountability for the shifting of standards was weighed differently by different observers.^[8]

After completing three full terms (the maximum allowed, by a rule he had himself initiated) and nearly a decade as head of the firm, Gupta became senior partner again in 2003 and senior partner emeritus in 2007.^[9] Gupta is widely regarded as one of the first Indians to successfully break through the glass ceiling, as the first Indian-born CEO of a multinational corporation.^[3]

Gupta's mentors at McKinsey included Ron Daniel, the former managing director who as senior partner first hired Gupta into the New York office, and Anupam (Tino) Puri, the first Indian at the Firm and eventual senior partner.^[3] He, in turn, mentored Anil Kumar as another early Indian-American at the consultancy. Gupta and Kumar "were the face of McKinsey in India."^[10] According to The Financial Times, "the two operated as a forceful double-act to secure business for McKinsey, win access in Washington and build a brotherhood of donors around the Hyderabad-based ISB and a handful of social initiatives." ^[10]

Gupta maintained an office, executive assistant, email and phone at McKinsey and Company after 2007,^[11] and maintains the title "senior partner emeritus" of the firm^[12] — though in the wake of subsequent scandals a McKinsey spokesperson was quoted as saying, "Our firm no longer has a professional relationship with Rajat Gupta."^[13] According to NDTV, "sources tell us that the firm dropped Mr Gupta from its alumni database, and called clients worldwide to say that they would have nothing to do with him going forward."^[14]

Outside McKinsey & Company[link]

In 1997 Gupta co-founded the Indian School of Business (ISB) with friend and fellow senior partner Anil Kumar. The school was ranked number 13 in the world by The Financial Times in its "Global MBA Rankings 2011".^[15] Gupta and Kumar have both since resigned as chairman and executive board director respectively.^[16][17]

Before stepping down as managing director he co-founded Scandent Solutions with Ramesh Vangal and the American India Foundation with Victor Menezes and Lata Krishnan. After McKinsey Gupta co-founded and chaired the private equity firm New Silk Route, formerly named Taj Capital Partners, with Parag Saxena and Victor Menezes.

He served on the corporate board of directors of Goldman Sachs, Proctor and Gamble, American Airlines parent AMR, Harman International, and Sberbank. He was also senior advisor to KKR (formerly Kohlberg, Kravis, Roberts & Co.), the chairman of Galleon International, and advisor to other financial institutions such as the Qatar Financial Centre.

Philanthropy[link]

Gupta’s philanthropic efforts focus on the areas of education, global health, and global business. His activities within the field of education include co-founding and chairing the Indian School of Business with Anil Kumar and serving on the Board of Directors of many business schools including Harvard Business School, Northwestern’s Kellogg School of Management, MIT Sloan School of Management, Tsinghua University School of Economics and Management, Skolkovo and the Lauder Institute at Wharton.^[18][19] In addition, he served on the Yale President's Council, founded and chaired the IIT Alumni Association, and was a member of the board of trustees of the University of Chicago. He was additionally on the board of Millennium Promise and the Pratham India Education Initiative.

Gupta’s activities in global health include serving as a founding Board member and then Chairman of the Board for The Global Fund to Fight AIDS, Tuberculosis and Malaria and as the co-founder and founding Chairman of the Public Health Foundation of India.^[20] He was also on the board of the Emergency Management and Research Institute, Health Management Research Institute, and International Partnership for Microbicides. He was also chairman of the advisory board and the India AIDS initiative of the The Gates Foundation as well as its Global Health Initiative. He was a member of the board of the Global Health Council and the Harvard School of Public Health, as well as the Weill Cornell Medical College.

Gupta is also a supporter of global business through his work as Chairman of the International Chamber of Commerce, a founding Board member of the World Economic Forum, a Board member and Executive Committee member of the US-India Business Council, and member of the Advisory Council to the Prime Minister of India.^[21]

Gupta was also appointed as special advisor on management reform to UN Secretary-General Kofi Annan.^[22] He additionally served on the UN Commission on the Private Sector and Development and was co-chairman of the United Nations Association of America.

In addition, Gupta was a trustee on the board of the Rockefeller Foundation^[18] and was elected in 2009 to the American Academy of Arts and Sciences.^[23]

Controversy[link]

McKinsey & Company[link]

The notion of company growth has been controversial from the 1970s as the firm began its global expansion; McKinsey opened many new offices under Rajat Gupta's tenure in the late 1990s. The election of British-born Ian Davis as Gupta's successor was seen as "a return to McKinsey's heritage".^[24]

Additionally, though a McKinsey spokesman said "It has always been a clear violation of our values and professional standards for any firm member to provide consulting or advisory services outside of McKinsey for personal monetary gain," Gupta "was an advisory director from 2005 to 2007, for which he was granted 81,405 stock options, valued at 93 cents each then, according to Genpact’s 2008 proxy statement."^[25] During this period, while an active senior partner at McKinsey, he also set up New Silk Route and worked with InfoUSA for Mindspirit.

Sberbank board seat[link]

Gupta was paid nearly five times as much as the next corporate director for his board seat at Sberbank, prompting a watchdog group to vote against his reelection.^[26]

Tamilnad Mercantile Bank[link]

India's Enforcement Directorate alleged in 2012 that Gupta violated India's Foreign Exchange Management Act in an attempted hostile takeover of the Tamilnad Mercantile Bank. According to The Economic Times, "Gupta and seven NRI investors led by Vangal picked up 24.93 per cent equity in TMBL with the clear understanding among themselves to acquire substantial TMBL shares and get representation on the bank’s board."^[27] Gupta and Vangal had previously co-founded Scandent Solutions.

Insider trading trial[link]

	Rajat Gupta and Raj Rajaratnam FBI wiretap on July 28, 2008 of McKinsey senior partner emeritus Rajat Gupta speaking to Galleon Group founder Raj Rajaratnam about Goldman Sachs, senior partner Anil Kumar, Galleon International and Kohlberg Kravis Roberts
Problems listening to this file? See media help.

On March 1, 2011, the SEC filed an administrative civil complaint against Gupta for insider trading with billionaire and Galleon Group founder Raj Rajaratnam. Coverage of the event noted that Anil Kumar — who, like Gupta, had graduated from IIT, was a highly regarded senior partner at McKinsey, and had also co-founded the Indian School of Business — had already pleaded guilty to charges in the same case.^[28] Gupta, Kumar, and Rajaratnam were all close friends and business partners. Gupta countersued and both sides eventually dropped.

On October 26, 2011 the United States Attorney's Office filed criminal charges against Gupta. He was arrested in New York City by the FBI and pleaded not guilty. He was released on $10 million bail on the same day. Gupta's lawyer wrote, “Any allegation that Rajat Gupta engaged in any unlawful conduct is totally baseless .... He did not trade in any securities, did not tip Mr. Rajaratnam so he could trade, and did not share in any profits as part of any quid pro quo.”^[29] The SEC alleged, "The tips generated 'illicit profits and loss avoidance' of more than $23 million." Manhattan U.S. Attorney Preet Bharara said, "Rajat Gupta was entrusted by some of the premier institutions of American business to sit inside their boardrooms, among their executives and directors, and receive their confidential information so that he could give advice and counsel."^[30]

In April 2012, another charge relating to passing P&G information was added by the prosecution. Gupta's lawyers countered that "newly added charges -- like the ones brought last year -- are not based on any direct evidence, but rely on supposed circumstantial evidence". More new charges based on new information may follow.^[31] The defense has maintained that "the wrong person is on trial".^[32]

In early May 2012, a pre-trial defense motion for access to SEC settlement-negotiation documents was denied by Judge Rakoff.^[33] Also in early May, the prosecution made a motion to play in trial three FBI wiretaps of two Rajaratnam "conversations with his principal trader and another with Galleon's then portfolio manager" related to the Goldman Sachs information.^[34] As well, details of wiretap recordings and trading activity related to the charges were analyzed at length in the media, assessing the strengths and weaknesses of the prosecution's and defense's cases.^[35][36][37]

The current case is focusing on the relationship between Raj Rajaratnam, Anil Kumar and Gupta.^[38] Gupta, Rajaratnam, and Kumar were all involved to varying degrees as founding partners of of private-equity firms Taj Capital and New Silk Route, though Rajaratnam and Kumar left before they began operation. Gupta remained as chairman of New Silk Route, and Rajaratnam eventually invested $50 million in the fund.^[39]

Rajat Gupta's trial began on 22 May 2012.

Personal life[link]

Rajat Gupta married Anita Mattoo, two years his junior, in 1973 after they had met at IIT. She was an electrical engineer, and according to him "a much smarter student" than himself. The couple met at college debates and plays.^[40] Mattoo came from Srinagar, Kashmir, India.

Gupta owns several properties that he uses for both work and pleasure:

• His primary residence is a two-acre estate in Westport, Connecticut that formerly belonged to JC Penney and his family, which was valued at $13 million as per town records of October 2011.^[30]
• He owns a $4 million waterfront home on the Gulf of Mexico in Palm Island, Florida.^[1]
• He owns an apartment in Manhattan.^[41]
• He owns a ranch in Colorado.^[3][42]

According to the Economic Times, "His big mansion in Connecticut is like a public dharamsala, where friends, professors and McKinsey colleagues are encouraged to come and live, often with their families. He is also known to ask colleagues to take a break at his Colorado ranch with their families - something unheard of in the McKinsey world at that time."^[42]

Gupta has four daughters: Geetanjali Gupta-Nwanze, Megha, Aditi and Deepali. In 2008, Geetanjali Gupta married Chukwuemeka Nwanze, an Igbo from Asaba, Nigeria, son of Vincent Nwanze, former Deputy Consul-General at the Nigerian Consulate in New York. The wedding was held at Rajat Gupta's house in Westport, Connecticut. Geetanjali was reported to be a Harvard BA, MBA and JD as well as a manager of the Harvard endowment fund. Emeka is a Harvard BA and Yale MBA and MD specializing in ophthalmology.^[43]

See also[link]

• Anil Kumar — in particular career
• Galleon insider trading case — in particular relationship with Rajaratnam and Gupta
• Indian School of Business — in particular history and formation
• McKinsey & Company, Inc. — in particular Notable employees and Galleon case
• New Silk Route — in particular history and formation
• Raj Rajaratnam — in particular conviction
• SEC v. Rajaratnam — also U.S. v. Rajaratnam

Appendix: Affiliation list[link]

Below is a list of his affilitaions. Source: various official biographies May be incomplete and quite likely out-of-date^{[44][45][46][47]}

Corporate[link]

• Senior partner emeritus, McKinsey & Company, Inc.

Former:

• Managing director (CEO), McKinsey & Company, Inc.
• Chairman of the Board, Genpact Limited
• Member of the Board, AMR Corporation and American Airlines Inc. subsidiary
• Member of the Board, Goldman Sachs
• Member of the Board, Harman International.
• Member of the Board, Procter and Gamble
• Member of the Board, Sberbank
• Co-Founder and Member of the Advisory Board, Symphony Technology Group

Financial[link]

Former:

• Co-Founder and Chairman, New Silk Route (NSR)
• Senior advisor, Kohlberg Kravis Roberts
• Chairman-elect, Galleon Group International

Status unknown:

• Member of the Board, Qatar Financial Centre
• Chairman of the Advisory Board, Clutch Group LLC
• Member of the Advisory board, Fjord Capital Partners Ltd
• Senior advisor, TeleSoft VC partners
• Advisor, Novitaz, Inc.
• Advisor, OmniCapital Group LLC

Education[link]

Universities[link]

Former:

• Member of the Board of Trustees, University of Chicago
• Member, Yale President’s Council
• Chairman, IIT Alumni Association^[48]

Business schools[link]

Former:

• Co-founder and Chairman of the Board, Indian School of Business
• Chairman of the Board of Associates, Harvard Business School
• Member of the Board of Governors, Lauder Institute of Management & International Studies, The Wharton School, University of Pennsylvania

Status unknown:

• Member of the Board, Skolkovo
• Member of the Advisory Board, Kellogg School of Management
• Member of the Dean’s Advisory Council, Massachusetts Institute of Technology Sloan School of Management
• Member of the Dean’s Advisory Board, School of Economics and Management, Tsinghua University

Medical schools[link]

Former:

• Member of the Board of Overseers, Weill Cornell Medical College

Status unknown:

• Member of the Dean’s Council, Harvard School of Public Health

Non-profits[link]

Former:

• Member of the Board, Pratham India Education Initiative
• Member of the Board, Millennium Promise

Global Health[link]