Photo illo: Ed Johnson

When Rajat Gupta was sentenced to two years in prison last Wednesday, the government finally nailed to the wall the largest scalp it has taken to date in its multiyear investigation of rampant insider trading on Wall Street. He wasn’t the richest—that would be erstwhile hedge fund manager Raj Rajaratnam, the man to whom Mr. Gupta was convicted of passing confidential information he learned while serving on the boards of Goldman Sachs and Procter & Gamble. But he’s certainly the highest-profile person to be convicted of such charges since everybody’s favorite reprobate homemaker, Martha Stewart. Like Ms. Stewart, Mr. Gupta got off easy—two years instead of the eight to 10 that the government had asked for. But that’s the way the world works, people. Get used to it.

Mr. Gupta plans to appeal, of course. Which is one reason why his statement before U.S. District Judge Jed Rakoff was so predictably aggravating: he expressed remorse—albeit only for the effect the trial has had on those close to him—and declined to make any admission of guilt. It was the classic, “I’m sorry if what I said offended you,” non-apology apology. No matter. Like my longtime nemesis Conrad Black—the disgraced former newspaper mogul who served two years for fraud yet still feels compelled to absurdly proclaim his innocence every chance he gets—no one really gives a damn, or believes a word he says. They both broke the law and were convicted for their crimes. Period.

There is a legal wrinkle that might get Mr. Gupta off somewhere down the road, in what will surely be a lengthy appeals process: the fact that he didn’t seem to benefit financially from his insider dealings. But again, that’s one for the lawyers to argue about. In the court of public opinion, the man is a criminal. Case closed. In this non-lawyer’s humble opinion, his failure to profit doesn’t make him innocent—it just makes him stupid in addition to being unscrupulous. I wonder what it must feel like to be one of the only people to get punished for committing a financial crime in recent years. For a man who has spent his life as part of the global elite, now to be seen as nothing but a common criminal must be a profoundly humbling experience. That’s the thing about prominent people committing common crimes; strip away their expensive lawyers and their bluster, and it all just seems so ... pedestrian.

And what a steep fall it has been. Mr. Gupta’s was a singular career—he was one of the most prominent India-born chief executives of a major international concern—McKinsey & Co., which he ran between 1994 and 2003. (He left the building in 2007.) And in subsequent years, he was a giant in the world of philanthropy. But as this whole ordeal has shown, his is actually the same story we’ve heard a million times before. In fact, the broad strokes of Mr. Gupta’s case are eerily familiar in more ways than one.

The Conrad Black Effect

The loquacious Mr. Black was convicted of defrauding the shareholders of Hollinger International, a company over which he had almost absolute control. If all he needed was a few extra bucks, the man could have just given himself a raise. Instead, like an idiot, he chose to break the law. But stupidity is no defense for wrongdoing. Indeed, it is its constant companion. The same goes for Mr. Gupta: While he wisely refrained from emailing his partner in crime, thereby distinguishing himself from an even dumber cohort of modern-day Wall Street criminals, he did phone him literally seconds after telephonic board meetings of Goldman Sachs to spill the beans about confidential earnings reports and other news. What ever happened to the old meeting on a park bench? Don’t these boneheads watch Homeland? You should have just put an “X” in white chalk on the lamppost, Rajat. Maybe next time.

The Reverse Lance Armstrong Effect

In the lead-up to his sentencing, Mr. Gupta’s team somehow convinced his friends in both business and philanthropy to write letters to the court on behalf of the fallen corporate consigliere. He even managed to get Bill Gates to send over a statement of support, although Mr. Gates wisely avoided comment on the case itself and merely pointed out Mr. Gupta’s important work for the Bill & Melinda Gates Foundation. There’s no arguing about the good that Mr. Gupta has done, including being a founder and chairman of the board of The Global Fund to Fight AIDS, Tuberculosis, and Malaria. And we should thank him for that. But it doesn’t change the fact of his crimes.

Lance Armstrong’s defenders pursued a similarly desperate line of argument when the final nail went into that cheater’s inner tube. “Look at all the good he has done!” they said, as if having used his ill-gotten fame and fortune to fight cancer canceled out the bad acts that brought him to prominence. You might be able to convince me to buy that logic if Lance had given all his own money away. But he hasn’t—one recent report estimated his net worth in excess of $125 million. So no, Lance, it doesn’t change the fact that you’re a lifelong cheater and a bullier of your teammates.

If I knock over a bank and give half the money away, does it absolve me of guilt for keeping the other half? Of course not. And while Mr. Gupta surely is, as Judge Rakoff pointed out, an otherwise good guy who did a very bad thing—thus differentiating him from Mr. Armstrong, who seems to have been a very bad guy who went on to do good—the point is the same. You don’t get to stack all your benevolent deeds up on one side of the scales of justice to try to counter the weight of your crimes. It’s a different goddamn scale. Maybe Mr. Armstrong and Mr. Gupta are still getting into heaven for all their good works—you won’t find me blocking their way—but before Mr. Gupta steps through the pearly gates, he has at least got to pass through another set of gates, those protecting a medium security prison in Otisville, N.Y.

The Martha Stewart Effect

During the trial, one popular gripe was that that the government was going after Mr. Gupta because of his high profile. That’s the same gambit that Martha Stewart’s lawyers tried when she got caught with her hand in the insider trading homemade double-chunk macadamia cookie jar. God, that’s a tiresome one. Let’s be honest here—there are different rules for the rich and the poor in this country. But nothing sows the seeds of contempt more than the “You’re just targeting me because I’m so successful” defense. Having spent some time talking to U.S. Attorney Preet Bharara about the Rajaratnam and Gupta cases, I can tell you exactly why he targeted those prosecutions: Because he had the goods on them. The government prefers to bring cases it can win. Mr. Gupta was charged, in other words, not because he was famous, but because through his own illegal actions he handed Mr. Bharara and his team an airtight case.

The Goldman Sachs Effect (a k a The McKinsey Effect)

Defending himself against the criticism that his headlines overpromised, the former editor of Money magazine, Frank Lalli, famously retorted, “What’s a headline? It’s a shouted message down a crowded bar.” The point was that we all know that editors use headlines to grab our attention—that’s why they’re so big—and there was no crime in a little hype. (A long-time Money staple: Retire Rich!) Much of the media has eagerlymentioned Goldman in the headlines of all its Gupta stories because … well, you know. Because that’s the kind of thing that moves product. While I am not usually in the business of making apologies for Goldman, this is one instance in which the bank was unfairly tied to a case it actually had nothing to do with. In fact, in this case, Goldman was a victim. The best part? Mr. Gupta is objecting to Goldman’s bid for reimbursement of the legal fees (and the cost of an internal investigation) it was obliged to cover due to his crimes. What an asshole.

The same goes for McKinsey & Company. While there’s an argument to be made that Mr. Gupta damaged that institution severely when he was running the joint—you can read more about that in my history of the company, The Firm, due out in August—it’s totally wrongheaded to suggest that McKinsey’s reputation ought to suffer for actions he took years after leaving the company. He’d been gone since 2007, after all, and his offenses had nothing whatsoever to do with McKinsey. Alas, the same can’t be said for the misdeeds of Mr. Gupta’s old McKinsey colleague, Anil Kumar, who pleaded guilty in this same investigation. He sold McKinsey client secrets out the back door. You can be sure McKinsey has locked said door and thrown away the key. Point being, while it’s hard to marshal sympathy for either Goldman or McKinsey—quite possibly the two most arrogant and self-satisfied professional services entities on the planet—in this case, we need to give them both a pass.

The Deterrent Effect (a k a Money, Money, Money)

In addition to his jail time, Mr. Gupta was fined $5 million by the court. He’ll appeal that, too. But kudos to Judge Rakoff for bringing the punitive hammer down. Hopefully the fine will put the fear of God into other insider trading punters on Wall Street who have correctly concluded—up until this point, at least—that even if they’re caught, their punishments will be embarrassingly mild. Hit them where it counts—in the pocketbook containing the money they all worship so dearly—and the message might actually be heard. Rajat Gupta is certainly hearing it loud and clear.

editorial@observer.com

Mr. Rajaratnam

The Securities and Exchange Commission settled insider trading charges today against the former tech company chief financial officer alleged to have leaked insider information to imprisoned Galleon Group hedge fund manager Raj Rajaratnam.

In 2006, Xilinx CFO Kris Chellam tipped Mr. Rajaratnam to negative trends in the company's business at odds with public projections, allowing Galleon to turn a profit of nearly $1 million, according to a press release:

... in the weeks leading up to Xilinx’s December 7 update, Chellam received multiple reports indicating that the company’s third quarter business results were not going to be as positive as projected in October. Chellam learned on November 21 that the top end of the projected revenue range was being lowered from $490 million to $470 million. He attended a December 4 confidential executive staff meeting where the bottom end of the revenue projection was lowered from $476 million to $455 million. On December 5, Chellam telephoned Rajaratnam and tipped him about Xilinx’s worse-than-expected performance. Just minutes after the call, Galleon hedge funds controlled by Rajaratnam sold short Xilinx stock, eventually selling short more than 650,000 shares over the course of that day and the following day.

Mr. Chellam agreed  to pay $1.75 million in fines and disgorgement, which is not so bully for him. But unlike former McKinsey & Co. CEO Rajat Gupta, who was sentenced this week to two years in prison for sharing inside information with Mr. Rajaratnam, but who did not profit directly from Galleon's illicit trades, at least Mr. Chellam did not go uncompensated for his troubles. According to the SEC's complaint:

Chellam tipped Rajaratnam not only because the two were good friends, but also because Chellam had a substantial investment in Galleon, including in one ofthe funds that profited from the tips Chellam provided about Xilinx. Chellam was also in discussions with Rajaratnam concerning prospective employment at Galleon. In May 2007, Chellam became the Co-Managing Partner of the Galleon Special Opportunities Fund, a venture capital fund that focused on investments in late-stage technology companies.

Which, if you're going to break the law, seems like a less noble/more sensible motivation.

Goodbye Smith Barney: Morgan Stanley is rolling out a name-change for the 75-year-old brand, according to The New York Post. The brokerage, jointly-owned with Citigroup, will be called Morgan Stanley Wealth Management. In its heyday, Smith Barney was known for its advertising slogan: “They make money the old fashioned way: They earn it.”Regarding name-changes, your favorite Charlotte-based lender spend some time pondering whether Bank of America Merrill Lynch was too much of a mouthful for its investment bank.

Rajiv Goel, the former Intel employee whose testimony helped convict Galleon Group founder Raj Rajaratnam of insider trading last year, was sentenced to two years probation and force to disgorge more than $260,000 for his participation in Mr. Rajaratnam's scheme.

Lawyers for Peregrine Financial Group founder Russell Wasendorf Sr., who pleaded guilty to stealing millions from customers of his futures brokerage, want their client released on bail pending sentencing.

The International Monetary Fund wants more austerity measures from Greece. Greek Prime Minister Antonis Samaras is twisting arms.

A new book on Angela Merkel draws parallels between the German leader and Don Corleone.

DoubleLine Capital CEO Jeffrey Gundlach is offering $1 million for the safe return of a painting by Piet Mondrian that was stolen from his Santa Monica, Calif. home last month, and another $500,000 for the return of works by Jasper Johns and Joseph Cornell.

A hedge fund makes it (a little bit) easier for investors to pull money out.

Mr. Whitman was charged with making illegal trades on technology companies such as Polycom and Google, and faces up to 25 years in prison at a sentencing hearing scheduled for Dec. 20. His conviction, which comes three days after baseball hall-of-famer Eddie Murray agreed to pay more than $350,000 to settle charges that Mr. Murray traded on an illegal stock tip provided by former teammate Doug DeCinces, brings the total defendants to plead guilty or be convicted of insider trading since 2009 to close to 70.

"Mr. Whitman had a hedge fund with his name on the door, with rules against insider trading," said U.S. attorney Preet Bharara in a statement. "He flouted those rules, tarnished his name and now is a convicted felon facing imprisonment."

Picking up the pace: The Treasury and the Fed are speeding efforts to offload assets acquired during the 2008 bailout of the country's banking system. The government is expected to sell or be repaid on $29 billion in securities in the months to come.

Set free: Anil Kuman, the cooperating witness you helped the government secure insider-trading convictions against Raj Rajaratnam and Rajat Gupta, was rewarded yesterday, receiving two years probation and no jail time for his involvement in the insider-trading scheme run by Mr. Rajaratnam.

Stiffer penalties: Japanese lawmakers are seeking to rewrite securities law to provide for criminal prosecution of brokerages and bankers that leak inside information. No underwriters have been charged for giving investors early word on new stock offerings in Japan's ongoing insider trading probe.

Movers: Robert Wolf, the top UBS banker whose close ties to President Barack Obama seeming to some like less an asset and more a liability, leaving the bank to open his own shop, called 32 Advisors. Credit Suisse hired Morgan Stanley banker David Hammond to lead its metal and mining advisory. Don Mullen, one of the architects of Goldman Sachs' big subprime trade, is aiming to raise a $500 million fund to buy foreclosed homes as rental properties.

Splits: Whitney Tilson plans to keep a lower profile after separating from T2 partner Glenn Tongue. "I will dramatically reduce my television appearances, interviews with the media, blogging/writing, and public speaking, both in the investment and philanthropic realms," he said in a letter obtained by Dealbreaker.

Student protection: The Consumer Financial Protection Bureau recommended Congress rewrite a 2005 law to allow student debtors to seek bankruptcy protection on private loans.

IPO off: Guitar maker Fender is not going public after all, citing market conditions in cancelling its initial public offering.

European leaders promised a more integrated banking system at the G-20 meeting in Mexico City yesterday, listing common banking oversight and depositor guarantees among future steps to be considered.

Asset managers like Legg Mason are preparing for worst case news out of Europe.

Greek savers aren't the only ones stuffing banknotes under their mattresses; Reuters reports that institutional investors are increasingly holding cash.

("If you wrapped up all the $100 bills in circulation, it would form a cube about 74 feet per side...")

Spain paid 2 percentage points more to borrow on 12-month bonds yesterday than it did one month ago.

If all that paints too rosy a picture, talk to Mark J. Grant.

For a little optimist, CNBC brings you Mark Mobius.

Jon Stewart interviews the drachma.

Your tab... Goldman Sachs advanced Rajat Gupta nearly $30 million to cover legal expenses, according to The New York Times, salt in the wounds after a) the former McKinsey & Co. chief executive and Goldman director passed Goldman secrets to hedge fund manager Raj Rajaratnam, according to the jury and b) Mr. Gupta's defense team took an adversarial approach to the parade of Goldman execs appearing at the witness stand (one attorney for Mr. Gupta called Goldman CEO Lloyd Blankfein "cold and callous," according to The Times). Anyway, Goldman has been picking up the tab because firm bylaws require the bank to pay the legal fees of executives and board directors; Mr. Gupta signed a pretrial agreement stipulating that he would pay his own legal bills if convicted.

Hide the whale: Bruno Iksil, the JPMorgan trader known as the London Whale, sometimes resisted sharing the details of his trading positions with superiors,The Wall Street Journalreports: "Mr. Iksil once confided to the colleague that when he wanted to avoid questions from supervisors about his trades, he sometimes would start discussing a mathematical term, equation or other technical jargon, to confuse and end the conversation."

Jamie Dimon is scheduled to testify before the "harsher and crazier" House of Representatives today.

BofA to divest? Swiss private bank Julius Baer is in talks to acquire Bank of America's non-U.S. wealth management unit, which manages about $90 billion, and which Reuters says could be worth about $2 billion.

Short-term fix: Nine months and $15 million later, Michael Francis is out as president of J.C. Penney.

Bharara.

A former marketing executive at AT&T pled guilty to insider trading charges after providing sales data for the Apple iPhone and RIM's Blackberry to a so-called expert network, said U.S. Attorney Preet Bharara in a statement.

Alnoor Ebrahim, 57, of Alpharetta, Georgia, pled guilty to one count of conspiracy to commit securities fraud and wire fraud. According to a press release, Mr. Ebrahim was paid more than $180,000 between 2008 and 2010 for providing nonpublic information on handset sales to investors. The charge carries a maximum sentence of five years.

The guilty plea comes after Mr. Bharara's office obtained a guilty verdict in the insider trading trial of Rajat Gupta, the former McKinsey & Co. chief executive charged with passing corporate secrets to now-imprisoned hedge fund manager Raj Rajaratnam.

Mr. Ebrahim's guilty plea marks the government's 63rd insider trading conviction since October 2009.

Updated to correct the number of insider trading convictions obtained by the government in recent years.

The downgrade didn't prevent Spain's Amancio Ortega, founder of retail giant Inditex, from becoming Europe's richest person, according to the Bloomberg Billionaire Index.

“We have no sense that European partners will follow this tactic of blackmail heard from some quarters and stop funding,” Alex Tsipras, leader of Greece's anti-bailout Syriza party told Bloomberg Television. Rather, Mr. Tsipras thinks that Greece can break the terms of the European rescue agreement signed by a previous Greek government without being forced to exit the eurozone.

"If the Greeks do not meet the commitments they have made, do not meet their financial commitments, do not repay loans, Slovakia will demand that Greece leaves the euro zone," Slovakia Prime Minister Robert Fico said at a news conference today.

Credit Agricole's Grexit contingency plans include walking away from Greek assets, The Wall Street Journal reports.

Germany beat the Netherlands 2-1 on goals by Mario Gomez.

Softballs: Jamie Dimon got in and out of Senate Banking Committee hearings without being pressed too hard on JPMorgan's recent trading losses, and Heidi Moore says it comes down to one chief reason: No amount of regulation can prevent banks from making stupid decisions.

Mr. Dimon's recent troubles may have created space for another Wall Street boss to claim the title of America's Least Hated Banker.

Emerging market: Large institutional investors and the Wall Street firms that bank them are talking about creating an electronic marketplace for corporate bonds, The Journal reports. BlackRock and Goldman Sachs are among firms that have begun building their own platforms.

Lawyer's suit: Former Dewey & Labouef partner Henry Bunsow is suing the law firm, which filed for bankruptcy on May 28, charging that the firm encouraged partners to make capital investments in the firm in what amounted to a pyramid scheme. "Defendants used partner capital investments as a form of revenue to enrich themselves and to hide the dire condition of the firm from the public,” read Mr. Bunsow's complaint.

Tear-jerker:Wily defense counsel Gary P. Naftalis drew tears from client Rajat Gupta, the former McKinsey & Co. founder accused of passing corporate secrets to Galleon Group's Raj Rajaratnam, during closing remarks of the insider-trading trial at the U.S. Southern District courthouse in downtown Manhattan. “Whatever you do here will mark whatever future he [Gupta] has left,” Mr. Naftalis said. “To believe the argument of the defense team, you’d have to believe Mr. Gupta is one of the unluckiest men in the world,” prosecutor Reed Brodsky told the jury.

What's funny about that? If you've been following the trial at all, you know that the government's insider-trading case against Rajat Gupta hangs in large part on charges that the former McKinsey & Co. CEO used his standing on Goldman's board of directors to pass lucrative secrets to Raj Rajaratnam.

And if you've been following the case especially closely, you may know that in 2006, after leaving Goldman, Mr. Schwartz helped found an investment fund called Taj Capital—later renamed New Silk Road—the same fund that counted Raj Rajaratnam and Rajat Gupta among its investors.

Which, of course, is not to say that Mr. Schwartz was mixed up with either of those scoundrels. As The New York Times reports, Mr. Schwartz left New Silk Road almost as soon as he got there—his tenure was so brief that Goldman didn't mention its press release today. (Short tenure had to be it, right?) But in a trial sometimes short on entertainment value—we miss you Lloyd!—you take it where you can.

Meanwhile, in more pertinent Southern District news, Judge Rakoff disallowed a pair of wiretaps that Mr. Gupta's defense had hoped would show that a Goldman executive named David Loeb had supplied Mr. Rajaratnam with inside dope. In turn, the defense rested, and closing arguments begin tomorrow.

“We have the spent the last day reviewing what we believe we need to present in the defense case,” Mr. Naftalis wrote. “After substantial reflection and consideration, we have determined that Mr. Gupta will not be a witness on his own behalf in the defense case.”

That news marked a change in course, according to The New York Times, which reports that Mr. Naftalis told the court last week it was "highly likely" that the defense would call Mr. Gupta to the stand. On the other hand, it may simply mark Mr. Naftalis' decision to discard an oft-used red herring.

"If you want your adversary to waste time preparing for a cross-examination, you might make them think that you're going to call the defendant," Columbia law professor John Coffee told us about a week ago, during a call to discuss the challenges of prosecuting white collar crimes. "It he took the stand it would be make-or-break, and I don't see a veteran counsel like Mr. Naftalis going through with it."

With Mr. Gupta off the docket, closing arguments could begin as soon as tomorrow.

[World Economic Forum/Michael Wuertenberg]