It isn’t Goldman Sachs, which is TBTI (Too Big To Indict) but it’s not small potatoes either when the US Attorney for New York, Preet Bharara, was able to win a conviction against the founder of the hedge fund, The Galleon Group, by using tactics normally reserved for pursuing organized crime figures.
Hedge fund founder Raj Rajaratnam was found guilty on all 14 counts in a sweeping insider trading verdict on Wednesday that vindicated the government’s aggressive use of phone taps to prosecute Wall Street figures.
Rajaratnam, founder of the Galleon Group and the central figure in the broadest Wall Street insider trading probe in decades, will appeal the use of the secret recordings, tactics historically deployed in organized crime and drug trafficking cases, not white-collar probes.
One-time billionaire Rajaratnam, the richest Sri Lankan in the world, faces a potential minimum of 15-1/2 years in prison after the verdict in Manhattan federal court convicting him on all 14 counts of conspiracy and securities fraud.
The jury’s decision, which many legal experts had predicted given the phone tap evidence and trial testimony of three friends-turned-government witnesses, affirmed the prosecution case that Rajaratnam ran a web of highly-placed insiders between 2003 and March 2009 to leak valuable corporate secrets that earned him an illicit $63.8 million.
Rajaratnam gang of “insiders” included individuals at Intel Corp. and a former board member of Goldman Sachs (there’s that name again!). In fact, prosecutors even called the head of Goldman Sachs, Lloyd “We are doing God’s Business” Blankfein as a witness in the case. Already some securities lawyers are referring to this as a historic case with many implications for future conduct by Wall Street operators:
“It’s an historic verdict. It’s a dramatic verdict,” said Bill Singer, securities lawyer with Gusrae, Kaplan, Bruno & Nusbaum.
“It will likely set the stage for a dramatic change not only in the way that the Wall Street insider-trader activities are investigated and prosecuted, but most likely this will have a chilling effect on individuals and companies that trade.”
I don’t know about that. Wall Street has a short memory when it comes to prosecutions, as anyone who can remember the 80’s conviction of Junk Bond dealer Michael Milken can attest.
But it no doubt explains a lot of the Street’s antagonism to Obama. He’s actually allowing the DOJ to treat the big money scams and cons committed by the Big Banks and Brokers as well — crimes to be taken seriously, investigated and prosecuted. I’m willing to bet that more than most, Wall Street is probably more unhappy than most with the current GOP presidential field for 2012, because even if Republicans retain control in the House (and maybe grab the Senate) there doesn’t appear to be a legitimate contender to Obama at the moment. And we all know how the last Republican President treated financial and corporate fraud during his eight years in office: “See No Evil, Hear no Evil, Receive Campaign Contributions.”
If Wall Street’s Mob Bosses leaders have to deal with another 5 and 1/2 years under the threat of investigations and prosecutions by the DOJ, they are going to be very, very uncomfortable. The Street is all about passing the risk of market losses onto its marks clients while insuring they make money regardless. For the first time in a long time they might have to occasionally play it straight.
I am curious, however: how much credit do you think the media is going to give Bush for this conviction?
