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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.

[More...]

"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.

    Parent
    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.

    Parent
    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.

    Parent
    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.

    Parent

    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.

    Parent

    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.

    Parent

    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.

    Parent
    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.

    Parent

    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.

    Parent
    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.

    Parent
    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.

    Parent
    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."

    What???

    Parent