Victimism

UPDATE: From the LA Times today:

Prosecutors unsealed an indictment detailing insider-trading charges against one of the kings of American finance, Rajat Gupta, who surrendered to authorities earlier Wednesday morning. 

A grand jury charged Gupta, the former head of the McKinsey & Co. consulting firm, with five counts of securities fraud and one count of conspiracy to commit securities fraud for providing inside information to hedge fund magnate Raj Rajaratnam, who was recently convicted and sent to prison for 11 years for insider trading.  

The complaint, unsealed in Manhattan federal court, says that Gupta, 62, provided Rajaratnam with information he had learned as a board member of Goldman Sachs and Procter & Gamble in 2008 and 2009. In one instance, Rajaratnam placed trades based on the information within 39 seconds of learning it from Gupta, authorities said. 

In total, prosecutors say that Rajaratnam's Galleon Group hedge funds made profits or avoided losses of $23 million thanks to information from Gupta. They say Gupta stood to gain because of his business partnerships with Rajaratnam, including a private equity fund that they co-founded to invest in projects in Asia. ... 

Gupta was accused at the time of passing information to Rajaratnam about Warren Buffett's $5-billion investment in Goldman at the height of the financial crisis. The revelations came just days before Rajaratnam's trial on insider-trading charges began...

That sounds hilariously blatant: Hey, Raj, you know how I'm on the board of Goldman? Well, we board members just learned that Warren Buffett's going to invest $5 billion in Goldman. It will be front page news all over the world tomorrow and our stock will go up. Don't mention it to anybody, though, or try to make money off this information. It's a secret. And good luck on your insider trading trial. [Warning: This is not an actual voicemail message left by Mr. Gupta. I just made it up.]

In a dramatic turn in the case, Gupta surrendered to the FBI to face criminal charges at 5:15 a.m. Wednesday morning at the agency's Manhattan headquarters.

From Newsweek:

The Outsider 

In an exclusive interview, Raj Rajaratnam reveals his surprising motivations—and the reasons he didn’t take a plea that could have saved him from 11 years in jail. 

by Suketu Mehta

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.... 

... 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. ... 

It was Rajaratnam’s understanding that were he to plead guilty and wear a wire, he might be offered a sentence of as little as five years. With good behavior, he could be out in 85 percent of that time. The evidence on the wiretaps was incontrovertible. It was his voice on the phone asking a variety of informants about companies he was investing in, and giving them loans and other monetary rewards in exchange. 

Of the 50-odd people caught up in the insider-trading scandal, “most everyone that’s been charged has pled guilty,” notes Rajaratnam. “Nobody’s fought it. They’ve taken the plea.” But he decided to plead not guilty, and was later convicted on all 14 counts of insider trading, and is now going to jail for 11 years. 

Why didn’t he take the plea? 

Rajaratnam was a man who lived for information; his entire business edge was built on acquiring information before others did. But when it came to the biggest bet of his life, this master of information was guided—as he saw it—by the political history of his people, his personal journey as a dark-skinned immigrant through the rich countries, and a 3,000-year-old tradition of astrology. 

The whole story speaks to the South Asian–American community: its pursuit of success and money at any cost; the differences between immigrants and the first generation; and the immigrants’ incomplete understanding of the rigor of the law in the U.S. 

“There are rules and there are laws, and they apply to everyone, no matter who you are or how much money you have,” says Bharara. This is what was not easily understood by the South Asians named in the conspiracy. There are laws and rules in India and Sri Lanka, too, but they can be tested, ignored by those who have money or friends. 

Rajaratnam is an immigrant, not American-born. He had grown up, as he tells it, in fear: of the Sinhalese majority in his homeland; of the skinheads in Britain where he’d studied; and of the established elites of Wall Street where he did business. At just about every stage of his life, there were people out to get him. “I saw myself as an underdog.” 

Rajaratnam has lived in his penthouse apartment for 15 years. ... 

Rajaratnam’s father was an upright executive, the head of the Singer Sewing Machine Co. in South Asia. Residing in Colombo, the capital of Sri Lanka, in the 1960s, the family was Tamil, an ethnic minority favored by the colonial British. After independence, the majority Sinhalese systematically discriminated against the Tamils. Sensing that the situation would get more violent, Rajaratnam’s family emigrated in 1971. He was already in boarding school in London. Two years earlier, his parents sent the 11-year-old to study at Dulwich College. “P. G. Wodehouse went there,” I prompt him. Wodehouse is beloved all over South Asia because his comic novels demonstrate that the former colonial masters were ... silly. His face lights up. “I spent three years in his room. People who stay in rooms in Dulwich write their names. When I moved in, I could see his name. I wrote mine below.” 

Afterward, Rajaratnam went to Sussex University, in Brighton, to study engineering. These were the days when a far-right party, the National Front, was marching through the streets, beating up “Pakis,” who were easy targets. “They wouldn’t fight back. They were more docile.” Rajaratnam was once with his uncle in a tough London neighborhood, walking down the street, when three white men rammed their shoulders into the older man. “We started pushing and shoving,” but did not run. “Running has never been part of my M.O.” 

As a consequence, both Rajaratnam and his uncle got beaten up. But “I didn’t get beaten up any more than they did.” After that incident, Rajaratnam took to carrying chili powder in his pockets when he ventured out at night. “I was conscious of the fact that I could be attacked because of my ethnicity.” 

After Sussex, he decided to get an M.B.A. at Wharton. Of the 600-odd students there, 20 were South Asian. That’s where the Galleon network began. His roommate ended up being head of investor relations at Galleon; another classmate later oversaw Asia for Galleon. 

Altogether, four people from his class ended up working for him. Most ambitious South Asians at the time went to Silicon Valley. “Wall Street was tough to get into for us. Not to be crude, but there’s a Jewish mafia, and a WASP mafia, and an Irish mafia up in Boston.” 

He rattles off the names of the leading money houses, identifying each by the ethnicity it is stocked with. “They hire their own; they socialize among their own.” When it comes to the South Asians, he bemoans the fact that “for us as a group there’s no unity.” He mentions the microscopically specific matrimonial ads in India Abroad, a community newspaper. “A Punjabi Khatri wants to marry a Punjabi Khatri ...” 

He was among the South Asian pioneers on Wall Street. “We didn’t grow up reading The Wall Street Journal. We didn’t have someone who knew someone who could give us an interview. We didn’t have the domain knowledge; we were all foreigners.” Americans had the connections. 

Wall Street attracted type-A personalities, “people who could say, ‘I want to make a million dollars before I’m 30.’ ” Rajaratnam found this strange. “Culturally, we couldn’t say that. We were too shy to say, ‘I want to make a lot of money.’ We were more coy.” He noticed, too, that “Americans are born salesmen and born negotiators.” When he was a kid, if he wanted to go to a movie and his father said no, that was it. With his American-born son, however, “if I say no, he starts negotiating.” 

Rajaratnam’s first job out of Wharton was at Chase Manhattan. Then he worked as an analyst for Needham & Co., in 1985, a startup. Rajaratnam was its 10th employee, and first South Asian. He started following the semiconductor industry. The PC was taking off, advanced computer chips were being mass-produced, and his engineering background helped him understand the technology. He became director of research and, in a few years, president. “I was in the right growth sector.” Along the way, he hired several South Asian analysts. At one point, George Needham, the chairman, asked him why he was hiring so many South Asians. In response, Rajaratnam read off the names on the company’s trading desk. “Almost all of them were Jewish.” ...

Did he regret anything? 

“I’d probably not be so trusting of people.” It’s clear who he’s referring to. The government’s case rests principally on his two Wharton classmates. Anil Kumar, the McKinsey executive, was hired by Galleon as a consultant. The other, Rajiv Goel, worked at Intel for eight years. Both of them pleaded not guilty first, Rajaratnam notes, before they switched to guilty under prosecutorial pressure. ... 

Part of Rajaratnam’s narrative is that of a man from a smaller South Asian country seduced and betrayed by people from the Big Brother country. Kumar had introduced him to Rajat Gupta. The two of them wanted to start an Indian School of Business in Hyderabad. “I gave them [the school] a million dollars. I later found out they never contributed any of their money, and are listed as the school’s founders. And I’m not even a fucking Indian.”
The betrayal by the Indian associates hurts the most—he barely mentions the white government witnesses. He regrets doing a joint venture with the Indians. ...

“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.” 

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.” 

The Rajaratnam case can be seen as a metaphor of the difference between immigrants from South Asia, who have a more elastic view of rules and a more keenly developed art of networking, and their children, the first generation, schooled to play by American rules. Preet Bharara came to the U.S. when he was an infant. Yet for all his complaints about unfairness, Rajaratnam, surprisingly, still believes in American justice. “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.” 

Why so many Indian names in the indictments, I ask. “Because Roomy Khan’s network was Indian,” he explains simply. “They’re not being unfairly targeted. I don’t believe in conspiracy theories.” His brother Rengan sees it differently. “For years these guys were sitting around in sports clubs and exchanging information. That wasn’t a crime. And now we immigrants do the same thing and it is?” 

It makes sense: the Tamil schoolboy, persecuted in his home country; tormented in the U.K.; handicapped in his career, as he saw it, by his ethnicity. When faced with yet another antagonist, he reaches for the chili powder in his pockets. But still, wouldn’t the balancer of risk and profit have realized that the smart thing to do was to take the plea and hope for a reduced sentence, rather than risk dying in jail? (Rajaratnam has advanced type 2 diabetes; his kidneys are failing.) It seemed like an irrational decision. 

But there is an irrational explanation. A Sri Lankan diplomat close to Rajaratnam told me that she’d met him shortly before he was convicted. “He’d gone to the ola-leaf readers. They told him he’d be acquitted.” Ola-leaf readers are Sri Lankan astrologers. They believe that 3,000 years ago, seven Indian sages decided to write down the horoscopes of every person yet to be born, on a series of palm leaves. A skilled reader can read the leaves to present a complete life story of an individual, including his future. So on a subsequent meeting with Rajaratnam, I ask him about the ola leaves. “A friend did it for me,” he says, startled that I know.

... It fueled his conviction that he should fight the case all the way. It explains his puzzling insistence that he is innocent, in spite of the massive wiretap evidence to the contrary.

This was his edge; this was inside information that no one else had. 

Suketu Mehta, a professor of journalism at New York University, is the author of Maximum City.

In summary, it's only human nature that our world's reigning ideology of minoritarianism, which was most famously used for the benefit of African-Americans, is now subscribed to by random elites from all over the world, from places with zero connection to historical sins of the United States of America, to rationalize their own ethical corner-cutting within America: Sure, we may look like a bunch of Wharton MBAs, but we're really outsiders, victims of discrimination, so therefore we are morally justified.

My old articles are archived at iSteve.com -- Steve Sailer