By Miles Weiss and Joshua Gallu


(Bloomberg) -- Raj Rajaratnam, the billionaire hedge-fund manager accused of insider trading, started an investment firm in 2006 with partners including Rajat Gupta, former head of McKinsey & Co., and Mark Schwartz, ex-chairman of Goldman Sachs Group Inc.’s Asia business.

Rajaratnam’s role at Taj Capital, formed to manage hedge funds and private equity focused on South Asia, illustrates the breadth of his global business connections as he ran New York- based Galleon Group LLC. He cut ties with Taj Capital when the firm abandoned plans to start a hedge fund, another co-founder, Parag Saxena, said yesterday in an interview.

The New York-based firm, renamed New Silk Route NSR Partners LLC, oversees $1.4 billion in private-equity investments, according to filings with the U.S. Securities and Exchange Commission. Holdings include stakes in Hyderabad, India-based Aster Infrastructure Pvt. Ltd., a provider of wireless-telecommunications towers, and Augere Ltd., a London- based developer of wireless broadband networks in emerging markets, according to New Silk Route’s Web site.

“It was envisioned to be a different business that included listed securities and unlisted securities,” said Saxena, who came to the U.S. from India in 1977. Rajaratnam “separated himself from the management of the company” after initial fundraising fell short of target.

Gupta declined to comment. Telephone calls to Schwartz weren’t returned. Dan Gagnier, a Galleon spokesman, declined to comment. Gupta, Saxena and Schwartz haven’t been accused of wrongdoing or implicated in any way in the Galleon case.

No Management Role

Rajaratnam “has no management role in New Silk Route nor any ownership in the firm,” Rupa Ranganathan, a spokeswoman for the firm, said in an e-mail. “Neither New Silk Route nor any of its owners have any investment in Galleon.” Rajaratnam has a stake of “well under” 5 percent in the firm’s fund, she said.

Gupta, 60, led McKinsey from 1994 to 2003 and is a senior partner emeritus at the consulting firm, which advises two- thirds of Fortune 1000 companies, according to its Web site. A native of India, Gupta joined McKinsey in 1973 after graduating from Harvard Business School and earning a bachelor of technology degree in mechanical engineering from the Indian Institute of Technology, the same school that Saxena attended.

He is a board member at Goldman Sachs, Procter & Gamble Co. and American Airlines Inc., and is chairman of Genpact Ltd., a Bermuda-based technology-service provider.

Gupta’s involvement in New Silk Route was a “big attraction” for investors, according to Saxena, who also serves on foreign-direct investment and venture capital task forces for the Indian government. “He knows a lot of people in the areas we were going to invest in.”

Anil Kumar
Gupta is an associate of Anil Kumar, the McKinsey director who allegedly gave material nonpublic information about Advanced Micro Devices Inc., a chipmaker based in Sunnyvale, California, to Rajaratnam. Kumar, who is free on $5 million bail after being arrested Oct. 16, helped Gupta establish the Indian School of Business in 1999, according to the Wall Street Journal.

Yolande Daeninck, a spokeswoman for New York-based McKinsey, had no immediate comment on the past affiliation between the firm’s former top partner and Rajaratnam.

In addition to Rajaratnam and Kumar, federal prosecutors have alleged that four other people participated in the $20 million scheme, described by the government as the largest hedge fund insider-trading ring ever. The prosecutors filed charges against Rajiv Goel, director of strategic investments at Intel Capital; Robert Moffat, an International Business Machines Corp. executive; and Danielle Chiesi and Mark Kurland of New Castle Partners, a former hedge-fund unit of Bear Stearns Cos.

Old Friends

Lawyers for the defendants have said their clients aren’t guilty.

Saxena, asked about his ties to Rajaratnam, said, “I have known him a long time.” He declined to specify how the four managing directors, including Schwartz and Rajaratnam, came together. Saxena said he and Gupta had business and personal ties.

Saxena, Rajaratnam, and Gupta “are old, old friends,” said Gautam Prakash, founder of Bethesda, Maryland-based Monsoon Capital LLC. Prakash worked at McKinsey for two years before founding Monsoon, which invests in India and has more than $500 million in assets under management.

Victor Menezes, 60, a former senior vice chairman of Citigroup Inc., is a member of New Silk Route’s investment team. He retired in 2004 after more than 30 years at the New York- based bank.

Goldman Veteran

Schwartz, 55, spent 22 years at Goldman Sachs, where he ran the New York-based bank’s Asia Pacific unit and served on its 15-member global management committee. After leaving Goldman, he worked for two years as CEO of Soros Fund Management, the New York-based hedge-fund firm of billionaire George Soros. He left New Silk Route in 2008 after concluding that investment opportunities in China had become less attractive, Saxena said.

Schwartz is co-chairman of MissionPoint Capital Partners LLC in Norwalk, Connecticut, according to its Web site. MissionPoint initially raised about $335 million for clean- energy and environment-related investments, according to documents filed with the SEC on Jan. 26, 2007.

Born in Sri Lanka’s capital, Colombo, Rajaratnam studied engineering at the University of Sussex. He came to the U.S. to get his master’s of business administration, graduating from the University of Pennsylvania’s Wharton School in 1983. He started Galleon in 1997, a business that earned him a net worth of $1.3 billion, according to Forbes magazine.

Fund Filings

Rajaratnam, Saxena, Gupta and Schwartz formed TCP Asia Fund LP in December 2006. Rajaratnam was the officer who signed the abortive fund’s private-placement notice, which stated that it would seek to raise as much as $1 billion.

The four are also listed as the managing partners of New Silk Route PE Asia Fund LP, a Westport, Connecticut-based private-equity fund that was also incorporated in December 2006 and raised about $1.34 billion, according to documents filed with the SEC in October 2008.