Tag Archive for 'Galleon Group'

The Outsider

Suketu Mehta, journalism professor and Maximum City author, interviews Raj Rajaratnam in Newsweek. From The Daily Beast:

Raj Rajaratnam

It was 6 a.m. on Oct. 16, 2009, and Raj Rajaratnam, head of the Galleon Group hedge fund, was at home on his exercise bike looking out over Manhattan’s Turtle Bay, thinking about how many shirts he would have to pack for his trip to England that day. He was to go there to launch a $200 million fund to invest in the Sri Lankan stock market, in which he, the richest Sri Lankan on the planet, was the biggest single investor.

At 6:30 his doorbell rang. He answered it to find a number of policemen and men in suits outside. An FBI agent named B. J. Kang told him he was under arrest for insider trading. There were five other agents with him, come to collect Rajaratnam. They asked if he had a gun, if he had drugs on the property. For a moment he was afraid they would plant something.

As they led him away from his family, Rajaratnam says Kang told him, “Take a good look at your son. You’re not going to see him for a long time.” He added, for good effect, “Your wife doesn’t seem so upset. Because she’s going to spend all your money.”

The interrogation, at the FBI office in lower Manhattan, lasted eight hours. They put a laptop in front of him and pressed a button. He heard the voice of his wife picking up his home phone. “Hello?” Then they clicked on another button and his voice came on, on his cellphone, talking to his Wharton classmate and friend Anil Kumar, discussing business matters at McKinsey, where Kumar worked. On the same day, Kumar and another Wharton classmate, Rajiv Goel, were charged with insider trading.

Two FBI agents, wearing prominently displayed guns, played good cop, bad cop. They thumped tables, jumped up and down, told him, “Just say you did it to one count!” But the suspect—who chose not to call a lawyer—was uncooperative. “In my head I was saying, ‘You can’t intimidate me! I’m from Sri Lanka’?”—where prisoners have to deal with much worse. They wanted him to turn in other hedge-fund managers. They wanted him, especially, to wear a wire and tape his conversations with Rajat Gupta, the former CEO of McKinsey. Gupta, whom Rajaratnam refers to as a “first-class guy,” was the most respected Indian executive in the U.S. More:

Preet Bharara takes on Wall Street

In The New Yorker, a fascinating article on Raj Rajaratnam, head of the Galleon hedge fund arrested on allegations of insider trading, and  the prosecutor Preet Bharara:

"Bharara is the son of a Sikh father and a Hindu mother who moved from Pakistan to India after partition; he is married to the daughter of a Muslim father who moved from India to Pakistan after partition and a Jewish mother who was born in Israel."

In the fall of 2003, Anil Kumar, a senior executive with the consulting firm McKinsey, and Raj Rajaratnam, the head of a multibillion-dollar hedge fund called Galleon, attended a charity event in Manhattan. They had known each other since the early eighties, when, as recent immigrants, they were classmates at the Wharton School of Business, in Philadelphia. Their friendship, intermittent over the years, was based on self-interest rather than on intimacy. Kumar, born in Chennai, formerly Madras, India, was fastidious and morose, travelling at least thirty thousand miles a month for work, and seldom socializing. Rajaratnam, a Tamil from Colombo, Sri Lanka, was fleshy and dark-skinned, with a charming gap-toothed smile and a sports fan’s appetite for competition and conquest. Kumar was not among the group whom Rajaratnam took on his private plane to the Super Bowl every year for a weekend of partying. “I’m a consultant at heart,” Kumar liked to say. “I’m a rogue,” Rajaratnam once said. Kumar had the more precise diction and was better educated, but Rajaratnam was one of the world’s new billionaires and therefore a luminary among businessmen from the subcontinent. In an earlier generation of immigrant financiers, Kumar would have been the German Jew, Rajaratnam the Russian. Kumar might have felt some disdain for Rajaratnam, but Rajaratnam’s fortune made him irresistible.

McKinsey executives, in an attempt to cash in on the explosive growth of hedge funds, had recently sent Rajaratnam several e-mails proposing that Galleon hire the company to provide expert advice. Rajaratnam had ignored them. Leaving the charity event, Kumar expressed annoyance about the unanswered e-mails, he later recalled. Rajaratnam pulled him aside. “I’d much rather have you as a consultant than McKinsey,” he explained. “And I am willing to pay you half a million dollars a year.” Kumar replied that McKinsey forbade outside consulting, but Rajaratnam persisted, appealing to Kumar’s pride: “You work very, very hard, you travel a lot, you are underpaid. People have made fortunes while you were away in India, and you deserve more.” He noted that Kumar, who provided strategic advice to Silicon Valley technology companies—one of Rajaratnam’s investing specialties—possessed knowledge that was worth a lot of money. Kumar had only to keep a list of “ideas,” and to call him once a month or so. “I know you will do that if you get money from me,” Rajaratnam said. “And I know you will not remember to keep a list if you don’t get money from me.”

Kumar agreed to be paid a quarterly sum of a hundred and twenty thousand dollars. To evade the scrutiny of McKinsey and of the government, he followed Rajaratnam’s instructions and set up a Swiss bank account for a shell company in Geneva called Pecos Trading, which transferred the quarterly payments, through offshore banks, to a Galleon account under the name Manju Das. This was Kumar’s housekeeper in Saratoga, California, who also cared for his ill son. “Lots of people set up offshore companies,” Rajaratnam said, trying to alleviate Kumar’s squeamishness. More:

The Raj trial and Wall Street’s South Asian elite

The trial of hedge-fund billionaire Raj Rajaratnam has riveted the financial world and shined a light on the phenomenal success and insularity of the Indians, Pakistanis, Bengalis, and Sri Lankans flooding the American financial sector, writes Gary Weiss in The Daily Beast:

Following every financial collapse, a cast of Wall Street bad guys invariably parades through the dock, from Depression-era thief Richard Whitney to junk-bond king Michael Milken to Ponzi schemer Bernie Madoff—media-saturated jaunts down the Via Dolorosa calculated to reassure the public that the financial markets are being policed, even though they’re not. This week, it’s the somber, bespectacled, self-made billionaire Raj Rajaratnam on display, as the biggest insider trading trial in decades heads to the jury.

Rajaratnam was not a player in the 2008 financial crisis. Like Madoff, he’s a kind of consolation prize, a distraction from the fact that none of the meltdown’s central figures have even been indicted. But as the trial has made clear over the past six weeks, he represents even more: the living embodiment of a changing Wall Street—not in its immorality, which is a permanent fixture of finance, but in its ethnicity. Wall Street is no longer a white-man’s preserve. South Asians—Indians, Pakistanis, Bengalis, and Sri Lankans—are ascendant.

This new South Asian Wall Street elite includes the CEO of Citigroup, Indian-born Vikram Pandit; Ajit Jain, also from India, a money manager emerging as the likely successor to investment guru Warren Buffett; and a half-dozen hedge-fund managers who use strategies based on mathematical algorithms to routinely rake in $50 million or more per year in income. Chief among the latter group is the Sri Lankan-born Rajaratnam, who ran a $7 billion hedge fund, Galleon Group, and largely to the disgust of this justifiably proud community, has emerged as the face of this new ethnic order.

In much the same way that the upwardly mobile Jewish community of the 1930s viewed Jewish gangsters as a “shanda fur die goyim” (shame before the gentiles), the “Raj trial” has put the South Asian financial clique on full display, for all its success—and insularity.

Over the past weeks, jurors have heard testimony from Anil Kumar, an old college buddy and former McKinsey executive who pleaded guilty to getting $2 million from Rajaratnam in return for inside information; Rajiv Goel, a former Intel executive who also pleaded guilty and now says he fed Rajaratnam tips about his old employer; and another witness who says Rajaratnam’s brother, Rengan, hastily removed office files the day the Feds started making arrests. Even the prosecutor, steely Preet Bharara, who made his bones ferreting out the firing of U.S. prosecutors who refused to pursue political cases for the Bush administration, is Indian-born. More:

The man who wired Silicon Valley

An examination of the career of Raj Rajaratnam, the founder of the Galleon Group, career reveals how, for two decades, he persuaded executives at some of America’s most prominent companies to risk their careers by passing corporate secrets. From The Wall Street Journal:

Raj Rajaratnam liked to tell people that his first name meant “king” in Hindi, and, coupled with his last name, that made him “king of kings.”

He told the story with the broad, toothy smile that had ingratiated him to a generation of Silicon Valley executives. The grin softened the edge of a boss who’d call you an “idiot” or prod you into some humiliating stunt: Would you take $5,000 to be shocked with a stun gun?

In a mansion on a manmade island in Biscayne Bay in February 2007, Mr. Rajaratnam seemed determined to live up to his regal description of his name. It was Super Bowl weekend, and America’s rich and powerful had descended on South Florida to watch the Indianapolis Colts play the Chicago Bears. Mostly they were there to do business. Mr. Rajaratnam’s business was running a hedge fund, Galleon Group, that had made him a billionaire. And that business was based on contacts. More:

Lanka terror victims sue hedge-fund founder

From the Wall Street Journal:

Raj Rajaratnam

Raj Rajaratnam

A group of victims of terror attacks by Sri Lanka’s Tamil Tigers rebels filed suit against Raj Rajaratnam, the Galleon Group hedge-fund founder charged in an insider-trading case, accusing him of funding the Tigers’”crimes against humanity.”

The suit was filed Thursday in U.S. District Court in New Jersey by 30 people who say they are survivors of attacks carried out by the Liberation Tigers of Tamil Eelam during decades of civil war against the Sri Lankan government.

The lawsuit alleges that from 2000 to 2007, Mr. Rajaratnam and a family foundation led by Mr. Rajaratnam’s father gave more than $5 million to a U.S. charity, called the Tamil Rehabilitation Organization, that the U.S. government subsequently declared in 2007 to be a fund-raising front for the Tamil Tigers. More:

Previously in AW: Desi vs. Desi

Illegal insider trading: A reflection of character

From Knowledge@Wharton

Recent news of the illegal insider trading charges against Raj Rajaratnam of the hedge fund Galleon Group and five others, the biggest such case in decades, has spawned its own round of jokes on Wall Street. Who are the most sought-after professionals in finance these days? Answer: Electricians, who are experts at figuring out if cell phones, landlines or offices have been bugged by the FBI. And what is the most popular spot in New York City? Answer: The area under the Brooklyn Bridge, where in the 1980s Ivan Boesky, the last big financial executive to be convicted of illegal insider trading, was said to exchange non public material information about stocks the old fashioned way — directly in person. More: