CEO Daily Brief – Mar. 2, 2011

Gupta Charged with Insider Trading by SEC The former head of consulting powerhouse McKinsey & Co. was charged with insider [...]

March 2 2011 by ChiefExecutive.net


Gupta Charged with Insider Trading by SEC

The former head of consulting powerhouse McKinsey & Co. was charged with insider trading in a civil action from the Securities and Exchange Commission.

Rajat K. Gupta, who headed McKinsey from 1994 to 2003, allegedly provided “inside information” to Raj Rajaratnam – the founder of Galleon Group – about companies on which he served on the board of directors – such as Goldman Sachs and Procter & Gamble.

He also tipped Rajaratnam off about a planned $5 billion investment by Berkshire Hathaway in Goldman Sachs in 2008 – before the deal was made public, the SEC claims.

Rajaratnam used the information to trade on behalf of some of Galleon’s hedge funds, or shared the information with others at his firm, who then traded on it ahead of public announcements by the firms, the SEC said.

The SEC claims that the insider trading by Rajaratnam and others generated more than $18 million in illicit profits and loss avoidance.

"Gupta was honored with the highest trust of leading public companies, and he betrayed that trust by disclosing their most sensitive and valuable secrets," Robert Khuzami, director of the SEC's Division of Enforcement, said in a press statement. "Directors who violate the sanctity of board room confidences for private gain will be held to account for their illegal actions."

Gary Naftalis, a lawyer for Gupta, told The Wall Street Journal the SEC's charges are "totally baseless."

Meanwhile, it will be up to the courts to decide how this case will turn out. Warren Buffett, 80, chairman of Berkshire Hathaway Inc., and has criticized the greed found on Wall Street, according to Bloomberg News, and pointed out that short-term profits can hurt performance in the long run.

For more about the case, as reported by Bloomberg, please click here.

 

China's Richest Man Plans to Open Department Store Chain

The man who is described as China’s richest person, Zong Qinghou, who made his fortune from beverage maker, Hangzhou Wahaha Group Co., plans to open 100 department stores.

Not content to rest on his laurels, the 66-year-old billionaire said he is working with local governments to find land for bigger stores, according to a report from Bloomberg.

“By setting up our own shops, we can have more say in the distribution” of Wahaha’s products, he told Bloomberg.

Wahaha was started in 1987 by Zong with a $21,300 loan. It is now the third-largest soft drink manufacturer in China.

He also plans to invest in mining and high-tech industries.

And in his spare time, he is a delegate to China’s parliament.

His personal wealth was estimated at $8 billion in 2010, according to an article in Forbes magazine.

He says he wants to do is “buy companies that make products that China lacks or China isn’t good at making and sell them back to China.”

It sounds to Americans that Zong is a real capitalist at heart – even if he has succeeded in one of the few remaining Communist-run countries. He should give inspiration to American business leaders that they should continue to work and promote free enterprise, even as they mature. Their companies, economies and nations will be better off from their efforts.

For more about Zong, as reported by Bloomberg, please click here.

 

CEOs Can Learn from the Movies

Not just movie lovers and drama students can learn from the films that won the Oscars this past Sunday. Business CEOs can learn some lessons, too, according to Barry Moltz, who writes for The Huffington Post.

For example, in the movie about a king of England, who struggles to overcome a stammer, “The King's Speech,” it’s clear that “resiliency wins.”

“It took decades of work for the King to make effective speeches. Only persistence and hard work can inch business owners towards their goals,” Moltz says.

Or, in a movie based on a New England family dedicated to boxing, called “The Fighter” one gains the lesson that success “takes hard work.”

“Dicky Eklund could have become a champion like his brother, Mickey Ward, if he had been serious about working harder,” Moltz said.

And in a movie about a business, “The Social Network,” based on the beginnings of Facebook, it’s clear that “Business success and wealth can bring out in the worst in people,” Moltz said. We learn in the film that Eduardo Saverin did not read a new stock agreement when Facebook brought in an outside investor. “When it comes to legal documents, trust no one,” Moltz added.

For more about learning management lessons from movies, as reported by The Huffington Post, please click here.