{"id":23118,"date":"2011-06-20T09:27:22","date_gmt":"2011-06-20T13:27:22","guid":{"rendered":"http:\/\/www.hedgeco.net\/news\/?p=23118"},"modified":"2011-06-20T09:32:53","modified_gmt":"2011-06-20T13:32:53","slug":"new-yorker-review-preet-bharara-on-the-galleon-hedge-fund-trial","status":"publish","type":"post","link":"https:\/\/hedgeco.net\/news\/06\/2011\/new-yorker-review-preet-bharara-on-the-galleon-hedge-fund-trial.html","title":{"rendered":"New Yorker Review: Preet Bharara on the Galleon Hedge Fund Trial"},"content":{"rendered":"

\"\"<\/a>New York (HedgeCo.net) – The June 27, 2011, issue of\u00a0The New Yorker, on page 42,\u00a0\u201cA Dirty Business<\/a>\u201d,\u00a0George Packer, writes about the biggest insider-trading case in history, and has an exclusive interview with Preet Bharara, the United States Attorney for the Southern District of New York, whose office pursued the investigation.<\/p>\n

When Bharara took office, in 2009, he made it clear that he would go after Wall Street greed, and the Galleon case helps to illustrate the broader culture of the financial world, in which, \u201cover the past decade, cheating and self-dealing became a principal way to succeed,\u201d Packer writes. But some Wall Street observers have called the Galleon case\u2014which included thousands of taped phone calls by the government and more than two hundred and thirty subpoenas for phone numbers by the S.E.C.\u2014a sideshow.<\/p>\n

The case centers around Raj Rajaratnam, the head of Galleon, a multibillion-dollar hedge fund, and Anil Kumar, a former senior executive with the consulting firm McKinsey, who, in 2003, secretly agreed to be an outside consultant to Rajaratnam. In seducing Kumar, Packer writes, Rajaratnam \u201cmade a valuable addition to the network that he had built up over the years.\u201d<\/p>\n

Initially, Kumar believed that he\u2019d be passing information to Rajaratnam legally, but it wasn\u2019t long before he realized that Rajaratnam wanted tips that he could convert into profitable stock trades, and Kumar began breaking both McKinsey\u2019s confidentiality rules and the securities laws that forbid such exchanges. When Kumar was arrested and subsequently handcuffed, Packer writes, \u201cHe fainted, hitting his head against a wall. He had to be treated at a local hospital before he could be brought in for booking.\u201d Later that day, Rajaratnam\u2019s wife sent a text message to Kumar\u2019s wife, which read, \u201cI\u2019m sorry.\u201d<\/p>\n

On May 11th, Rajaratnam was pronounced guilty on all charges, but his defense team has vowed to appeal. His attorney, John Dowd, accused Kumar \u201cof being the biggest liar in the history of the Southern District federal courthouse,\u201d Packer writes. After a Wall Street Journal article suggested that his team had been caught off guard by a cross-examination, Dowd shot off an e-mail to the reporter, which read, \u201cThis is the worst piece of whoring journalism I have read in a long time. How long are you going to suck Preet\u2019s teat? . . . . Preet is scared shitless he is going to lose this case so he feeds his whores at the WSJ.\u201d<\/p>\n

Some people have criticized Bharara\u2019s focus on an insider-trading scandal, given that the financial crisis was caused primarily by shoddy mortgages and the cynical trading of those irresponsible loans.<\/p>\n

Bharara, who, until now, hasn\u2019t spoken at length about the lack of financial-crisis prosecutions, tells Packer, \u201cIt bothers me a little bit when people suggest, without knowing anything, that we\u2019re not even bothering to look. We have grand-jury secrecy\u2014I don\u2019t go out and announce my investigations. But I got to tell you something: where there\u2019s smoke, we take a look. Do you have any idea how much people want to bring the case if it exists? So, what could be the reason we haven\u2019t? Sometimes people say, \u2018It\u2019s because you\u2019re beholden to these guys,\u2019 which doesn\u2019t make any sense. Do we look like we\u2019re afraid to prosecute anyone?\u201d <\/p>\n

Packer, after recounting in detail the story of the investigation of Galleon, explains why it wouldn\u2019t be easy to build prosecutions directly tied to the financial crisis. Top bank executives, with the assistance of lawyers and accountants, took care to insulate themselves from the fraudulent activities of mortgage lenders and other low-level players. <\/p>\n

The Department of Justice, under George W. Bush\u2019s attorney general, Michael Mukasey, \u201calso played a role in inhibiting vigorous prosecutions,\u201d Packer writes, by distributing the major new investigations across different offices and largely cutting out New York\u2019s Southern District, which has superior experience and expertise in accounting fraud.<\/p>\n

Several financial-fraud experts tell Packer that a task force, made up of assistant United States attorneys adept at financial investigations, should have been created, especially in New York\u2019s Southern District, and given two or three years to investigate a single bank. Such a major initiative needed to come from Washington, \u201cbut investigating Wall Street\u2019s big banks seems not to have been a top priority,\u201d Packer writes.<\/p>\n

The principal accomplishments of President Obama\u2019s interagency Financial Fraud Enforcement Task Force, which was created in November, 2009, have been press releases claiming credit for cases that often predated the financial crisis and involve low-level Ponzi and mortgage-fraud schemes.<\/p>\n

\u201cIt\u2019s just very hard for me to understand why there haven\u2019t been more indictments,\u201d Ted Kaufman, a former senator from Delaware, tells Packer. \u201cI am incredibly disappointed.\u201d Jeff Connaughton, Kaufman\u2019s former chief of staff, tells Packer that Attorney General Eric Holder \u201csaid in his swearing-in that he would make it a priority. We thought we were making sure that they were doing the right thing, and they said all the right things in hearings, and nothing happened.<\/p>\n

I feel gamed by it.\u201d Packer writes, \u201cPerhaps indictments couldn\u2019t be brought against top bank executives, but Bharara could take down Rajaratnam, and he went out of his way to give the case a high profile. It was his best chance to deter the pervasive corruption of Wall Street.\u201d<\/p>\n

The market \u201chas become more of an exclusive gambling club for the very rich than a level playing field open to the ordinary investor.\u201d But Bharara\u2019s campaign of deterrence \u201chas had a particularly strong effect on hedge funds.\u201d \u201cThere are a lot of nervous people out in the Hamptons,\u201d one criminal lawyer says.<\/p>\n

And Stanley Sporkin, a retired judge who was regarded as one of the S.E.C.\u2019s most aggressive enforcement chiefs when he served, tells Packer, \u201cPeople on Wall Street are going to be coming to work with brown pants on. It\u2019s going to change the way they work for a long time.\u201d<\/p>\n

Editing by Alex Akesson
For HedgeCo.net<\/a>
\nalex@hedgeco.net<\/a>
\nHedgeCo.Net<\/a> is a premier hedge fund database<\/a> and community for qualified and accredited investors only. Membership in HedgeCo.net<\/a> is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds<\/a>!<\/p>\n","protected":false},"excerpt":{"rendered":"

New York (HedgeCo.net) – The June 27, 2011, issue of\u00a0The New Yorker, on page 42,\u00a0\u201cA Dirty Business\u201d,\u00a0George Packer, writes about the biggest insider-trading case in history, and has an exclusive interview with Preet Bharara, the United States Attorney for the […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11,3,16022],"tags":[],"class_list":["post-23118","post","type-post","status-publish","format-standard","hentry","category-hedge-fund-fraud","category-hedgeco-news","category-opinion"],"_links":{"self":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts\/23118","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/comments?post=23118"}],"version-history":[{"count":3,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts\/23118\/revisions"}],"predecessor-version":[{"id":23123,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/posts\/23118\/revisions\/23123"}],"wp:attachment":[{"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/media?parent=23118"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/categories?post=23118"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/hedgeco.net\/news\/wp-json\/wp\/v2\/tags?post=23118"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}