Goldman Ex -Dir. Rajat Gupta To Be Charged for Rajaratnam Tips

Former Goldman Sachs director Rajat Gupta will surrender to the FBI tomorrow to face criminal charges related to Raj Rajaratnam. The charges are likely to pertain to allegations he gave Raj confidential information about Goldman Sachs, who then traded on the information:

Authorities said Mr. Gupta gave Mr. Rajaratnam advanced word of Warren E. Buffett’s $5 billion investment in Goldman Sachs during the darkest days of the financial crisis in addition to other sensitive information affecting the company’s share price.

Gary Naftalis, Gupta's lawyer, says:

Gupta's lawyer Gary P. Naftalis said Tuesday night that his client and Rajaratnam communicated for "legitimate reasons." He said his client didn't trade in any securities, didn't tip Rajaratnam so he could trade and didn't share in any profits.


"The facts demonstrate that Mr. Gupta is an innocent man and that he has always acted with honesty and integrity," Naftalis said in an emailed statement.

Raj gave his first interview to The Daily Beast/Newsweek. It's worth reading. He describes how on the day of his arrest, the agents tried to get him to wear a wire and get Gupta. They tried again two weeks before his sentencing. No dice.

As late as two weeks before the sentencing, Rajaratnam was still being asked by the government to turn on Gupta. But he wouldn’t wear a wire, he says, so he could sleep at night. “Anil Kumar’s son worked at Galleon one summer. I used to vacation with Rajiv Goel’s family. Their families knew my family. You don’t think this is going to haunt these guys? They wanted me to plea-bargain. They want to get Rajat. I am not going to do what people did to me. Rajat has four daughters.”.

Here's a curious comment by Raj:

There are two types of plea bargains. One is, you cooperate with the government. You finger 10 other people. The other is a plea bargain without cooperation.” The white defendants all pleaded without cooperating; they did not wear a wire. “The South Asians all did the plea bargain with fingering,” he notes sourly. “The Americans stood their ground. Every bloody Indian cooperated—Goel, Khan, Kumar.” He puts it down to “the insecurity of being an immigrant, lawyers bullying them into that position.”

Interestingly, Raj still mostly believes in the American justice system:

“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.”

...“In your case too?” I ask. “I said by and large.”

He describes his arrest and this unclassy (but all too typical) comment by an FBI agent:

As they led him away from his family, Rajaratnam says [FBI Agent B. J.] 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 FBI denies the agent made the comments. But they can't deny this deplorable perp walk.

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  • Display: Sort:
    Legalize it. (5.00 / 1) (#5)
    by Addison on Wed Oct 26, 2011 at 10:37:54 AM EST
    Frankly, I'm sick of this sort of stuff even being a crime -- I'm tired of the pretense that it's actually discouraged. These people are going to trade on their informational advantage, and there's nothing anyone can do to stop them. We should just make most forms of insider trading legal, but simultaneously wall off all these idiots from the "real economy" via regulation. Let them play their Boiler Room games, let them get rich trading phantom paper, or whatever it is they do. Re-organize and financially quarantine their big-boy playground to ensure their actions stop sabotaging the United States.

    Excellent idea... (none / 0) (#6)
    by kdog on Wed Oct 26, 2011 at 11:24:21 AM EST
    regulate in such a way that they can't screw us all speculating up the price of energy, healthcare, food, and other life or death essentials...and let 'em gamble and grift in sectors that don't have such a crippling effect on the entire world's quality of life to their cold heart's content.

    Casino (none / 0) (#11)
    by Addison on Wed Oct 26, 2011 at 12:10:16 PM EST
    Make their place of business, officially, a casino that people have to go into to lose money, and not a "bank" that is connected to everything whether non-bettors like it or not.

    Ya sold me... (none / 0) (#12)
    by kdog on Wed Oct 26, 2011 at 12:45:55 PM EST
    if I had my way I'd shut the NYSE down and replace it with a proper traditional casino...blackjack, roulette, all the legit games NY currently prohibits by law.

    So Go back to 1928 Wall Street ? (none / 0) (#8)
    by ScottW714 on Wed Oct 26, 2011 at 11:53:26 AM EST
    If it was legalized, the ascension of wealth would be so rapid, it would make this past decade look like a grade school con job.

    Why have a hedge funds, no one would invest, the wealthy would just call their wealthy compadres and manipulate the market to such a degree it would collapse, and everything us schmucks have would be gone, in the pockets of the rich before year end.

    I hear what you are saying, and we all know it's happening, but that would without a doubt put us in a the Greatest Depression.


    Oh noez! (none / 0) (#10)
    by Addison on Wed Oct 26, 2011 at 12:08:12 PM EST
    So regular people, knowing that hedge funds were a scam, might be encouraged to invest in local businesses on a personal, contractual basis and in other tangible things that were real? That certainly would be truly horrific.

    I should make it clear that don't expect insider trading to be legalized or Wall Street's excesses to every be cordoned off from wrecking everyone else's life. Neither of those things will happen. AndI recognize my comment is simplistic. But the idea that the laws stop most insider trading OR that incredibly lucrative (for some) financial speculation/betting is helpful to average Americans is wrong-headed -- and that was the main point of my comment.


    Got It (none / 0) (#14)
    by ScottW714 on Wed Oct 26, 2011 at 01:44:28 PM EST
    Looking through those rose colored specs again.

    Local Investment vs Wall Street is something I would definitely be down with.  People investing in a business they use, or at the least, is in the community.  Something they have vested interest in succeeding.

    I like it.

    Speaking of, trying to figure out what local Credit Union to go to.  Been looking for a couple weeks and even that is mind boggling.  I used to like BoA, now, and this is long before the stupid fees, it's just too much.  $5/mth is going to break most of the people on the news who are so mad, but their general behavior is just too much to support.


    USAA -- national and lauded for customer service (none / 0) (#16)
    by Addison on Wed Oct 26, 2011 at 02:24:19 PM EST
    Investing in local business is much riskier. (none / 0) (#26)
    by jpe on Wed Oct 26, 2011 at 06:39:09 PM EST
    If you think wall street is a casino, you shouldn't be anywhere near a local business.

    In a way... (none / 0) (#30)
    by Addison on Wed Oct 26, 2011 at 06:59:54 PM EST
    ...indiscriminate investment in local business is certainly risky, but investing locally (and with some degree of intelligence and knowledge of the market) gives you more awareness of what exactly you're investing in. And no one is talking about randomly choosing local investments -- or only funding start-ups.

    Additionally, there are risky national investments and safe local ones. So, is it safer for most people to invest in Wall Street? Most of the time the answer is probably yes -- investing in Coca-Cola is likely "safer" than investing even in a well-run and very profitable local business.

    But it's safer until it isn't (and/or you begin to trust people far away and they invest in something riskier than Coca-Cola), and at that point there's basically nothing you could have done to prevent idiots from fucking things up because it was money you sent to New York in exchange for non-liquid abstractions.

    I do get your point, though.


    I apologize... (none / 0) (#35)
    by Addison on Wed Oct 26, 2011 at 10:02:31 PM EST
    ...obviously normally I don't but this time I didn't even notice. Jeralyn can delete/edit the comment if possible.

    Her mimicking his trades isn't insider trading (none / 0) (#28)
    by jpe on Wed Oct 26, 2011 at 06:39:55 PM EST
    unless he was insider trading.

    Nope (none / 0) (#29)
    by NYShooter on Wed Oct 26, 2011 at 06:47:40 PM EST
    what makes "insider trading" illegal is the manner in which you receive the information. If an insider calls you and says, "we're buying out A,B,C tomorrow, and you then place a bet, that's illegal. But, if you're walking down the hall and, inadvertantly, overhear a conversation that A,B,C is being bought out, go ahead a buy all you want. Nothing illegal about it.

    Can't help with your instincts, but (none / 0) (#34)
    by NYShooter on Wed Oct 26, 2011 at 07:53:49 PM EST
    the Law? that's another kettle of fish.

    Remember the Pentagon Papers? It was illegal for Ellsworth to appropriate (steal?) them, but it wasn't illegal for the NYT to print them.....even though a crime was committed in oibtaining them.

    I know, I know, I don't understand either. I stopped trying to figure out "The Law" when Cheney "outed," (committed treason in my book) a top secret (NOC) agent, and we were told, "the Law is ambiguous on this issue, and it would be too difficult to prove his guilt."



    Tyler Durden asks (none / 0) (#1)
    by Militarytracy on Wed Oct 26, 2011 at 09:26:42 AM EST
    Is the love affair between the Obama Administration and Goldman Sachs officially over?

    Nah... this insider-trading stuff is just (5.00 / 0) (#2)
    by Anne on Wed Oct 26, 2011 at 09:39:05 AM EST
    low-hanging fruit, ripe for the picking, and not likely to draw anyone of real importance into the web where they could be held accountable, or - God forbid - embarrass the administration.

    While I don't think insider trading cases should be ignored, I've regarded them as easy headlines that can distract from the odor that still emanates from the underbelly that is the financial industry.

    And there's lots of embarrassment there for this administration in looking backward, not forward.  Which is why they refuse to do it, content to point to the Galleon cases as "proof" that they take the rule of law very, very seriously.

    Have I mentioned lately that I'm really tired of being treated as if I am stupid?


    I need to see a cracker... (1.00 / 1) (#3)
    by kdog on Wed Oct 26, 2011 at 09:41:37 AM EST
    get charged with something first.

    Looks like economic crimes are as unequally enforced as drug crimes.  Brown banksters beware!


    Rajat said the crackers won't (none / 0) (#4)
    by Militarytracy on Wed Oct 26, 2011 at 09:53:37 AM EST
    roll on each other.  We shall see won't we.  Rajat is pretty PO'ed though that in his words Indians are fine with fingering 10 other people as part of the plea bargain :)  People from India are more honest than crackers?  There are all sorts of ways to look at what is going down if it is truly going down as Rajat portrays.  He seems to think that crackers have more intestinal fortitude.

    I Don't care if 10 Crackers are Paraded Around... (none / 0) (#7)
    by ScottW714 on Wed Oct 26, 2011 at 11:45:24 AM EST
     ...to prove to us idiots that they care.

    It's not about race, and even saying that is pretty dumb.  It's about tossing a dog a bone, and these bones are brown, but who cares.

    You really think the puppet masters give a damn about color beyond green ?


    When it comes time... (none / 0) (#9)
    by kdog on Wed Oct 26, 2011 at 12:03:02 PM EST
    to offer up sacrificial lambs, it wouldn't suprise me if it comes down to skin tone...we do it in the drug war all the time.

    But This Is Nothing Like the Drug War (none / 0) (#13)
    by ScottW714 on Wed Oct 26, 2011 at 01:34:49 PM EST
    Who thinks of White collar criminals as brown/black.

    Not to point out the obvious, but name another person of race to take a fall, Madoff, Ebbers, the Whole Enron crew, lilly mothaFing white.  Not sure Ebbers is Wall Street, but Madoff was King Dingaling and Enron was manipulating energy markets.

    The farmer doesn't care what color pig he slaughters, it's about the best choice when deciding who gets turned into bacon.

    this of course all based on the theory that they tossed us a sacrificial lamb.  Seems likely, but not going to put any money on it.


    Madoff is jewish.... (5.00 / 1) (#15)
    by kdog on Wed Oct 26, 2011 at 02:21:40 PM EST
    Enron and Ebbers and Kozlowski were off-street grifters...unconnected in the big scheme.

    I wanna see one Ivy League Skull & Bones blueblood Anglo get pinched and I will gladly eat crow.


    Forgot where I read it, but (5.00 / 1) (#25)
    by NYShooter on Wed Oct 26, 2011 at 06:27:30 PM EST
    A rating agency that rates companies regarding their benefiting, or hurting, the job market and the deficit, rated General Electric as the #1 culprit in the world. #1 in decreasing jobs, and #1 in not paying any taxes.

    And, of all the Banks & Companies responsible for the current depression, no secret.......Goldman Sachs.

    So who does the "People's" President appoint as Chief of Staff & Special Advisor for JOBS:

    Daly from Goldman Sachs
    Immelt from General Electric

    Anne frequently asks, "Do they think we're stupid?"

    Answer: Not just stupid, but, apparently inconsequential

    I just wonder what the election results would be if the Republicans weren't as batt$hit insane as they appear to be.?


    Republicans are the only reason... (none / 0) (#38)
    by Mr Natural on Thu Oct 27, 2011 at 05:13:51 AM EST
    ... I vote for Democrats.

    Not only do they (none / 0) (#20)
    by jondee on Wed Oct 26, 2011 at 03:04:16 PM EST
    not get pinched, apparently, after blowing up the world, they're still at the top of the list of candidates for positions in the Whitehouse.

    And it's very debatable, imo, whose actions ultimately hurt more people: Madoff, or the Greenspan-Summers-Rubin syndicate.

    And the goggle-eyed-monster not only didn't (and won't) go to jail, he got a Presidential Medal of Freedom.


    Martha Stewart (none / 0) (#21)
    by jbindc on Wed Oct 26, 2011 at 03:35:33 PM EST
    The postergirl... (none / 0) (#22)
    by kdog on Wed Oct 26, 2011 at 03:48:07 PM EST
    sacrificial lamb!

    A WASP-y Yankee! (none / 0) (#24)
    by jbindc on Wed Oct 26, 2011 at 04:39:37 PM EST
    I knew I was getting (none / 0) (#23)
    by jondee on Wed Oct 26, 2011 at 03:48:46 PM EST
    'seasoned' when I started thinking Martha Stewart was hot..

    you must be kidding.. (none / 0) (#18)
    by jondee on Wed Oct 26, 2011 at 02:49:52 PM EST
    So called "insider trading" (none / 0) (#27)
    by NYShooter on Wed Oct 26, 2011 at 06:39:10 PM EST
    Is similar to our "war on drugs." You simply can't outlaw an activity that so many people engage in. The only problem with insider trading is its secrecy. If insiders, due to their privileged information, want to take advantage of that info, and invest accordingly, they should allowed to do so. But, it should be done publicly, and with a waiting period of, oh, something like 24 hrs. so that the general public could trade on the same information. If the judgment to buy (or sell) is correct, it will be correct tomorrow just as it is today.

    That makes absolutely no sense (none / 0) (#36)
    by fuzzyone on Wed Oct 26, 2011 at 11:56:42 PM EST
    Part of what makes insider trading a crime is that the information you are trading on is not publicly available.  Once it is publicly available it is no longer valuable because everyone has it and can act on it and its no longer insider information because everyone has it. It is know that Company A is going to buy Company B the day before everyone else and trading based on that information that is a crime.  To enforce what you are proposing would be no different from enforcing current law.

    I would never insult you (none / 0) (#37)
    by NYShooter on Thu Oct 27, 2011 at 01:08:40 AM EST
    By accusing you of not being able to read  (I'm certain you can read very well) so, maybe your "comprehension" skills could use a little tune up.

    Try reading my post again, s l o w l y this time, and see if your response is in any way germane to my comments.

    (hint) each, and every one, of your criticisms are addressed in my post