January 19, 2018

Convicted Hedge Fund Manager of Galleon Group Sounds Off

Sri Lanka, home of the Colombo World Trade Center, and former hedge fund manager Raj Rajaratnam's origins

The convicted hedge fund manager of Galleon Group sounds off on his insider trading charges, his background, and indiscretions during his arrest. Raj Rajaratnam, the central character in the largest insider trading case, was extremely successful in his career as the hedge fund manager of one of the most-respected funds on Wall Street, becoming a billionaire in the process. His insider network was faced with insider trading in 2009 and he recently was sentenced to 11 years in prison. Peter Lattman gives a wonderful summary on an exclusive interview in The New York Times’ Dealbook blog.

Newsweek has published an interview with Mr. Rajaratnam by Suketu Mehta. Here are the highlights:

When federal agents showed up at Mr. Rajaratnam’s door to arrest him on Oct. 16, 2009, he was at home on his exercise bike contemplating his trip to England, where he was set to start a fund to invest in the stock market of Sri Lanka, his native home.
Mr. Rajaratnam said that when federal agents led him away from his family, B.J. Kang, the lead agent on the case, said, “Take a good look at your son. You’re not going to see him for a long time.” He said that Mr. Kang added, “Your wife doesn’t seem so upset. Because she’s going to spend all your money.” (In an interview with DealBook, a spokesman for the F.B.I. strongly refuted Mr. Rajaratnam’s account of his arrest and denied that any threatening or inappropriate remarks were made by Mr. Kang or any of the F.B.I. agents present.)
During his initial interrogation, Mr. Rajaratnam was asked to wear a wire and tape his calls with Rajat Gupta, the former chief executive of McKinsey and a Goldman Sachs director. He refused. The Securities and Exchange Commission brought a civil action against Mr. Gupta, but has dropped its case; federal prosecutors have named him an unindicted co-conspirator but have not charged him.
Mr. Rajaratnam is a fan of P.G. Wodehouse, the English humorist who, Mr. Mehta noted, is beloved throughout South Asia. Mr. Wodehouse went to Dulwich College in London, the same boarding school Mr. Rajaratnam attended. “People who stay in rooms in Dulwich write their names,” Mr. Rajaratnam said. “When I moved in, I could see his name. I wrote mine below.”
As a South Asian, Mr. Rajaratnam said he found Wall Street tough to break into. “Not to be crude, but there’s a Jewish mafia, and a WASP mafia, and an Irish mafia up in Boston. They hire their own; they socialize among their own.”
Mr. Rajaratnam believes, for the most part, in the American courts. “In Sri Lanka I would have given the judge 50,000 rupees and he’d be sitting having dinner at my house. Here, I got my shot. The American justice system is by and large fair.”
Mr. Mehta, the author, provides an explanation for Mr. Rajaratnam’s insistence on his innocence despite the wiretap evidence of rampant insider trading: a Sri Lankan astrolger. Through a friend, Mr. Rajaratnam had his fortune read by an ola-leaf reader who predicted that Mr. Rajaratnam was going to be acquitted. The ola-leaf reader amazed Mr. Rajaratnam by guessing he was in the stock business. “So I don’t generally believe in fortune tellers and astrologers,” he said. “But the ola leaves were written thousands of years ago. In those days there was no share business. I found it interesting.”

Rajaratnam is a smart hedge fund manager who accomplished a lot before his downfall. His thoughts on the industry draw interest from those wanting an edge on the market. Unfortunately for Rajaratnam, the courts convicted him of having too large of an edge. The cases surrounding the case are not over. A friend of the hedge fund manager, Rajat Gupta, a former Goldman Sachs director, is being faced with the same charges. Rajaratnam did not want to wear a wiretap in his discussions with Gupta, leading to speculation that he did not want to implicate his good friend. Although the convicted hedge fund manager of Galleon Group sounds off on the case, there is much left unanswered.

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