Raj Rajaratnam, convicted of insider trading charges and now free after serving more than 7 years in federal prison, has written a new book, unequal justice, about his experience prosecuting in the Southern District of New York. Fellow Businesshala contributor John Tammany wrote the book and a great piece on Rajaratnam’s case.
Rajaratnam gave me a detailed interview where he talks about his book, his life now and his reflection on the matter that changed his life forever. He didn’t seem bitter, in fact, he seemed at peace with his life now. Part of that life is talking to the media, discussing his book and sharing insights on his downfall. While he was critical of the criminal justice system, he said he just wanted to shed light on a system that, of course, he knew very little about until the Federal Bureau of Investigation ordered guns on his doorstep. Did not knock along, due to which he was arrested. Here are some excerpts from our conversation.
Question: Once indicted, you spent a lot of time closing the firm, talking to clients, talking to employees, trying to defend your case, talking to family and friends, and finally taking some time off for yourself. . Describe that life and how you created it.
Rajaratnam: When the FBI came to my house, I thought, ‘That must be a mistake.’ Once I landed in the federal building in lower Manhattan they showed me the charges and I was thinking they really made a mistake. I found a lawyer and put my team together and I remember asking him how much time I would have to spend working on the case myself. He told me 3-4 hours a day during the workweek. I knew then that I would have to close the firm. People gave Galleon their money to invest in believing that we were good stewards of their investments. Once I realized that I could not devote all my resources to them, I closed it. It was heartbreaking and I helped as many people as I could to find other work. This was when I got really angry and said I was going to fight it with whatever I had.
However, the FBI started showing up at the doors of those employees saying that ‘Raj was going to throw them under the bus’. Suddenly, no one is calling me and my lawyer, John Dowd, tells me to avoid the media. During this, the government was leaking information to the media everyday. For my case having devoted 3-4 hours a day turned into 10-12 hours every day of the week of going over trades, email and instant messages. I had a small team of Galleon employees help me gather all the information I needed to help me sift through vast amounts of data. I refused to watch the news and instead looked at the data to uncover the truth. It was tedious work.
Question: What was your reaction to your lawyers interpreting federal sentencing guidelines and how much time in prison this could lead to?
Rajaratnam: I had never heard of federal sentencing guidelines. I didn’t know anyone who went to jail and I didn’t know anyone who knew someone who went to jail. Before all this happened, I assumed, probably like anyone, that there is a justice system and the bad guys go to jail and the good guys either aren’t charged or prove their innocence.
when john [Dowd] Told me that if things go bad I could be sentenced to 20 years in prison. It was bewildering. I chose Dowd because a good friend of mine told me not to choose a New York attorney because he made the best deal with prosecutors in the Southern District of New York where he worked. Dow was in Washington DC and once I put in the information they told me we could win. When we found out that the FBI had reached a warrant to monitor our calls, we again thought we might win. When we looked at the two primary witnesses who testified on the grand jury to indict me, we found they were nowhere in my trial… again we felt confident. I expected a fair fight but the rules seemed to be changing for me. It’s like showing up to a soccer game and the opposing team is using 3 quarterbacks with 3 footballs.
Question: What are your thoughts about Galleon and the people who work for you there?
Rajaratnam: I still feel terrible about what happened and for the people who have been hurt, I think it is unnecessary. Those employees did their jobs and we had MBA analysts, graduates with engineering degrees, we had PhDs on staff. These were hardworking people, smart people. What is not known are the individual stories of fear, intimidation by government law enforcement, the legal cost, injury to the families involved in these indictments that were more about finding glory than justice. Banks would not be held accountable when the banking crisis needed a delinquent and hedge funds were targeted. Those indictments of Operation Perfect Hedge made the careers of judges, FBI agents, prosecutors and US attorney Preet Bharara. It ruined the careers of many deserving people and had an untold impact on the lives of their family members.
Question: What did you do with your life in prison?
Rajaratnam: I went to sleep at night with a clean conscience and slept soundly. I left everything in the courtroom and realized that I had cleared my name but the jury saw it differently. When they did, I went to jail with my head held high. I had the opportunity to spend some time with Rajat Gupta [former Goldman Sachs board member and managing director of McKinsey & Co.], We played bridge and chess on the spot. As I mentioned in the book, Gupta’s allegations were nothing and neither of us paid heed to it [FMC Devens, Massachusetts],
i wrote the book unequal justice In prison, by hand. I have a newfound appreciation for the likes of Mark Twain because the physical act of thinking and writing is exhausting. Glad to write to pass the time and think about what had happened. It was therapy to put on paper what I felt and what had been going on in my mind for so long. To free themselves from what happened to me and to tell the world things they would never have known about the matter.
Question: Is it fair to compare the average investor to sophisticated traders like firms like Galleon?
Rajaratnam: I don’t think the FBI, judges or prosecutors ever understood the hedge fund industry. For example, large banks host conferences for a business segment such as healthcare. There will be hundreds of executives from various healthcare companies to provide commentary on their stocks, business conditions and future opportunities. Then there are breakout sessions where our analysts have meetings, some face-to-face, with executives from a major corporation. There is an active discussion and questions are asked. The questions that hedge fund analysts ask represent hundreds of hours of research on the industry, the company, and its competitors. The answers provide the insights on which we made business decisions. There is no way the average investor can compete at that level, nor have we ever seen the average investor as our competitor. Other hedge funds were our competitors. For US Attorney Bharara to say at the time that the information we were receiving was somehow different from that of the average investor, was fraudulent and did not reflect the nature of our work. Not only was his portrayal wrong, he made it a crime when none existed.
Even after Bharara was ousted as US Attorney, a think group on insider trading laws or some such formed, which concluded that insider trading laws needed reform. that remarkable conclusion was made by Bharara Task Force In 2020, years after his office misused existing laws to unfairly imprison people. That conclusion may be the only thing I agree with Bharara on.
Question: Former head of SAC Capital Advisors Steven A. What do you think about the outcome of the government’s case against Cohen (now renamed Point 72 Asset Management)? Cohen was a target in the SEC investigation but the Justice Department never brought criminal charges against him personally.
Rajaratnam: Steven Cohen doesn’t take up much space in my mind. I have no idea how he did business, but I would say that after meeting him a few times, he is one of the greatest equity traders of our time. He’s quite successful and I hadn’t been sued unfortunately, I may not have owned the New York Mets, but I could have owned a cricket team [Rajaratnam said in jest while chuckling],
When it comes to money, I am not jealous of anyone and would not wish what happened to us on anyone in our industry. I was a supporter of many charities, before the prosecution here in the US and in my home country Sri Lanka, and I am one to this day. While I loved Galleon and what we built, I’m happy to be out of that business now. What I have now is a better life.
Question: What makes Preet Bharara so successful in so many lawsuits… and what do you think of his lack there since leaving office?
Rajaratnam: I spoke to several former prosecutors, most of whom became defense attorneys, who worked with Bharara when she was an assistant U.S. attorney before President Barack Obama appointed her U.S. Attorney for the Southern District of New York. Were. What he told me was that he was a good lawyer who spent most of his time dealing with drug trafficking cases. However, according to those accounts, it was clear that no matter how minor the matter, Bharara liked to create the atmosphere of a circus where he was the ringmaster. I have to admit that he did an excellent job of avoiding being left behind…