Galleon: Hedge fund or mafia?
Is the government crackdown on hedge funds, complete with wiretaps, unfairly treating investors like mobsters?
Raj Rajaratnam, billionaire founder of the Galleon Group hedge fund, is led in handcuffs from FBI headquarters in New York.
(AP Photo/Louis Lanzano)
Why would hedge fund manager Raj Rajaratnam risk his $1.5 billion fortune for $20 million in illegal gains? said Peter Cohan in DailyFinance. He probably didn’t; it’s more likely that Rajaratnam—arrested for insider trading—and his $3.7 billion fund, Galleon, earned most of their 20 percent annual returns through cheating, with the help of Rajaratnam’s co-defendants from Intel, IBM, McKinsey, and New Castle Partners.
What’s notable about this case, said Gwen Robinson in the Financial Times, is the government’s “unprecedented—and extensive—use of wiretaps and other gum-shoe methods,” as if investors were “mobsters.” Embarrassed by the Bernie Madoff fraud, securities investigators are pulling out all the stops to show “they mean business.”
“Treating hedge funds like the mafia” will “play well politically,” said The Wall Street Journal in an editorial, but it doesn’t mean justice will be served. Especially with “the public’s anti–Wall Street mood” so strong, we’ll “reserve judgment” about the insider-trading charges until prosecutors “prove it in court.” After all, “information is the lifeblood of professional stock trading,” and the kind most traders share is “entirely legal.”
It’s true that the “overwhelming majority” of hedge funds aren’t “getting information on the sly,” said Matthew Goldstein in Reuters. But Galleon may not be part of that majority. It’s always had “something of a cowboy culture,” and it’s been in trouble with the SEC before. Hopefully this kind of “aggressive law enforcement” will help deter Galleon’s brand of “hubris and greed.”
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8 Comments
Posted by DanC, Monday, October 19, 2009, 2:18 pm Wall Streeters are racketeers in the exact meaning of that term: they conspire to commit crimes. There are so many crimes committed that a high ranking member of the staff in the New York Attorney General's office told me it's impossible to prosecute all the cases that are caught by police and the DA and the internal investigative unit of the NYSE because they don't have nearly the manpower. These people should be pistol whipped and rubber hosed. They're worse than the mafia. They've destroyed America.
Posted by Edgar, Monday, October 19, 2009, 2:29 pm What's the problem? This is how the ENTIRE Silicon Valley operates. They trade on gossip every day. One executive calls the other, and another. This is business as usual. I bet a bunch of offices in the valley are tapped, and the dragnet will get wider. They all think they are too big and too important to get caught.
Posted by MikeMcC, Monday, October 19, 2009, 3:31 pm SV execs must be wetting their pants. ALL of them trade on whispers, and all of them have moles within other companies. Quite a few of them personally know Raj, and the others. Where do we think Raj and his team got their info??? Insiders. Look at the wealthy execs in SV and research their trades, especially the ones who know Raj. I bet a bunch of telephones are tapped in SValley. Smile, guys, you are on tape and video! The feds must be having a ball in the Valley. You don't need to look too deep to find the moles in SV.
Posted by timothy mc kenzie, Monday, October 19, 2009, 5:16 pm Where is the outrage? Hope they keep digging because SV if full of rich, fat cat insider traders. How else would their fortunes have grown so big, so quickly? They are not THAT smart, just like RR. They all know him, too.
Posted by Cindy, Monday, October 19, 2009, 5:17 pm Who cares? Really, think any industry doesn't have insider trading? Some one had it bad for this gang.
Posted by PaulU, Monday, October 19, 2009, 10:01 pm To DanC: Your comments are ridiculous. You don't know any high ranking members of the attorney general's office, and you sound ridiculous for saying that you do.Most people who bash wall street don't even understand the function of banks and money centers in the lives of everyday people.And, by the way, study your history. If it weren't for JP Morgan himself making a loan to the good ol' USA, the USA might not exist today. You're just an angry, jealous, under achiever.
Posted by tim, Tuesday, October 20, 2009, 1:03 pm Cindy, the problem lies in the fact that many brokerages invested company pension funds in these hedge funds that had absolutely no basis in anything sustantial. It was like sidebetting on the outcome of a hand in a poker game, resulting in the collapse of many individuals' retirement incomes. There has to be some kind of regulations that limit pension fund investments to bluechiptype instruments. There used to be...
Posted by Tina, Tuesday, October 20, 2009, 2:15 pm The point is still valid. Name an industry that doesn't trade on insider info? They all do, and anyone who has spent any time in SValley knows that the industry is ripe with gossip, and they all trade on insider info all day long.
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