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?
I can’t wait for Rice, Rumsfeld, and Cheney to take credit.
Steven:
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.
Have you read Taibbi’s latest(The People vs. Goldman Sachs)? If Holder follows through on that, it will be the real sign instead of this small potato, relatively speaking.
I don’t mind seeing the law pursuing someone on insider trading related charges. This was a good DoJ action.
But it drives me nuts that Lloyd Blankfein saunters in as a witness for the prosecution while Goldman Sachs reaped billions bringing the world’s economy to ruin.
Well, considering the investigation into the insider network had been underway for a full year before Obama was even in office, I guess the Bush SEC is actually entitled to some credit.
Prosecutors like insider trading cases. They’re comparatively easy, you get to wiretap people and play supercop, and best of all the convictions can be used as fodder for the “few bad apples” theory, rather than risk upsetting the financial system over all. Win-win-win.
One reason that Dems might not make a big push to be associated with this conviction is that Rajaratnam was apparently a big-time Democratic party donor:
http://www.newsmeat.com/fec/bystate_detail.php?last=Rajaratnam&first=Raj
To me, that makes his conviction under a Democratic president all the more impressive. But if the media does indeed give Bush credit for this, it would be understandable if Dems don’t want to make a lot of noise about it.
Good to see that they are finally going after Wall Street culprits – but I find it interesting that it’s primarily after foreigners they are going after, like Deutsche Bank and now a Sri Lankan billionaire.
“I am curious, however: how much credit do you think the media is going to give Bush for this conviction?”
Not sure, but when I commented on BJ yesterday that “I have had the feeling for a long time that Obama decided to approach this problem legally rather than politically … “, good old Bob Loblaw chimed in and set me straight, retorting that “I have had the feeling for a long time that the investigation was undertaken by the Bush SEC for a full year before Obama was even inaugurated …”
So apparently the Bush administration was not part of the problem, as some (including me) may think, but in fact, the unsung pioneer of the solution! I don’t watch Fox News so I have no idea what Loblaw might be referring to. Can someone help me out here?
Ah, I see Bazooka Joe’s (above) has already addressed this. I’d still appreciate a link.
Anyway, I think Loblaw misunderstood me, I wasn’t referring to this one case alone, I was referring to a whole policy, the same as Booman where he says “[Obama]’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.”
Here’s what I wrote:
I don’t really care too much if they put Mr. Raja-Rat in a country club jail or not. I’m sure the feds gained a lot of information from this, and what concerns me more is to see them put 2 and 2 together. I want to see the whole rotten system taken down is what I want. I have had the feeling for a long time that Obama decided to approach this problem legally rather than politically, because he realized that even with all the legal loopholes, it was still based largely on outright fraud. That’s a surer path.
“The wheels of the law grind slow, but they grind exceedingly small.”
Or, as in the Sybilline Oracles,
“Late do the mills of God grind the fine flour.
Fire then shall destroy all things and give back
To fine dust, the heads of the high-leafed hills
And of all flesh. First cause of ills to all
Are covetousness and a lack of sense.
For there shall be love of deceitful gold
And silver; for than these did mortals choose
Naught greater, neither light of sun, nor heaven,
Nor sea, nor broad-backed earth whence all things grow,
Nor God who giveth all things, of all things
The Father, nor yet faith and piety
Chose they before them.”
(Milton S. Terry translation)
Apparently Mr Loblaw thinks the real credit, for the intention at least, goes to Bush.