Former Goldman Sachs board member Rajat Gupta, the biggest target of a US government blitz on insider trading, was sentenced to two years in prison Wednesday, far less than what prosecutors had demanded.
US District Judge Jed Rakoff in New York cited Gupta's "extraordinary" contribution to humanitarian and educational causes during his climb to the pinnacle of the US business world as the reason for rejecting the 10-year sentence sought by prosecutors.
However, he also turned down a defense request for a lesser, community service punishment that attorneys suggested could have been carried out by helping the poor in Rwanda.
Senior executives committing insider trading "must be made to understand that when you get caught, you will go to jail," Rakoff said.
Gupta, 63, must also pay a $5 million fine and was ordered to turn himself in on January 8. The Indian-born high-flier, whose wife, daughters and other members of his extended family sat behind him, was solemn, but showed no emotion as he heard his fate.
A few minutes earlier, he had told the court that this was "the most challenging of my life since I lost my parents as a teenager."
"I've lost the reputation that I've built for a lifetime," he said. "I regret terribly the impact of this matter on my family, my friends and the institutions that are dear to me."
Gupta was convicted in June of spilling boardroom secrets to his friend Raj Rajaratnam, the former Galleon hedge fund tycoon who was sentenced last year to 11 years in prison for his role at the center of an insider trading ring.
In addition to his spot on the Goldman Sachs board, Gupta had been head of the renowned consultancy McKinsey & Co, and a director of Procter & Gamble, making him one of the most successful Indian immigrants in the United States.
With his conviction after a three-week trial, he became the biggest scalp for fellow Indian immigrant Preet Bharara, the chief Manhattan federal prosecutor who has made a name for himself with a crackdown on Rajaratnam's insider network.
Rakoff said that Gupta, a major philanthropist who has been a leader in fighting malaria in Africa and in helping disadvantaged youths, "deserves credit."
The federal judge noted that several jurors cried as they delivered their guilty verdict "because they recognized this was a person with some very good attributes."
However, Gupta's feeding of secret business information about Goldman Sachs to Rajaratnam at the height of the 2008 Wall Street financial crisis was "disgusting" and the "equivalent of stabbing Goldman in the back."
The corrosive effect of insider trading, Rakoff said, "is to place in jeopardy the value of the marketplace, which is one of the most valuable assets the country possesses."
Bharara said after the sentencing that Gupta had "forever tarnished a once-sterling reputation that took years to cultivate."
"We hope that others who might consider breaking the securities laws will heed this sad occasion and choose not to follow in Mr Gupta's footsteps," Bharara added.
At the FBI, Acting Assistant Director in Charge Mary Galligan said that Gupta's disgrace was a warning to others.
"He broke the law. That is what he has to answer for today. The sentence imposed should send a clear message: providing a tip to a friend, when the tip is insider information, has consequences," she said.
Securities attorney Mark Rifkin said Rakoff correctly balanced both the good and bad in Gupta's record.
"As a former prosecutor and criminal defense lawyer, Judge Rakoff understood both sides of the argument, and the relatively light sentence he imposed balances Gupta's misuse of his position against a lifetime of good work," Rifkin said.