Rajat Gupta, who founded the Indian School of Business (ISB) in 2001, has stepped down as the school’s chairman as he faces civil charges for insider trading in the United States, the Financial Times reports. The charges against Gupta, the former global head of McKinsey, relate to his relationship with Raj Rajaratnam, head of the New York hedge fund Galleon Group, and the alleged passing of information between them. Gupta has denied any wrongdoing.
“Rajat Gupta has requested the Indian School of Business executive board to relieve him of his board responsibilities till his pending matter with the US SEC is resolved,” the ISB said yesterday.
According to the FT report, ISB’s loyalty to Gupta had increasingly begun to look out of step, given that the former McKinsey managing director had stepped down from boards at companies including Procter & Gamble and American Airlines after the U.S. Securities and Exchange Commission charged him with insider trading earlier this month. He had earlier left U.S. banking group Goldman Sachs, the FT added.
Gupta’s departure from the ISB board precedes an April 2nd board meeting, at which a new chairman will be considered. The board includes some of India’s most prominent business people, including business magnate Anil Ambani, bankers Chanda Kochhar and Deepak Parekh and industrialists Rahul Bajaj and Lakshmi Mittal.
Gupta, born in Calcutta and schooled in New Delhi, has been admired for his ascent within McKinsey and for his founding of ISB, which has been the center of a powerful network of top Indian business people and has rapidly climbed rankings of the world’s best business schools, according to the FT.
Until now, ISB stood by Gupta, believing him to be innocent until proven guilty, but the FT called his departure from the board “recognition in India that it may no longer be appropriate for the former consultant to hold high office while he faces the SEC charges.”
Indian institutions have been slower to respond to the crisis surrounding Gupta, and many of his closest associates in India, particularly at McKinsey, remain convinced that he will be vindicated in court, the FT reports. Although as details emerge in the Galleon trial emerge, that mood may be shifting, the paper adds, noting that Gupta’s close associate in India, Anil Kumar, has pleaded guilty to insider trading charges relating to passing information to Rajaratnam.
For the full Financial Times article, click here.
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