Raj Rajaratnam: #236 on the Forbes 400

From the New York Times:

It was around this time, coincidentally, that Gupta started getting closer to Raj Rajaratnam. The son of a Singer Sewing Company executive, Rajaratnam, who is 55, did not have much in common with the “twice blessed” generation. He attended the same English boarding school as P. G. Wodehouse. At Wharton, he struck some students as rich and loudmouthed. But he inspired a group of loyal followers who, in 1997, after he had spent nearly 15 years on Wall Street, helped him cobble together about $350 million and set up shop in a cramped office on Lexington Avenue and 57th Street. Rajaratnam, whose most attractive feature was a wide, gaptoothed smile, seemed to relish his reputation as a player. In 1999, he invited about 300 clients and brokers to a blowout Christmas party headlined by Donna Summer. But he backed up the publicity stunts with phenomenal returns. That year, one of Galleon’s funds soared 93.2 percent. By 2001, investing in technology stocks like Intel and Advanced Micro Devices, he had built Galleon into a $5 billion behemoth. 

All hedge-fund managers strive for an edge — an extra something that will help their funds beat the market average. For years, Rajaratnam had been dogged by the rumors that he owed his edge to insights from a circle of corporate insiders who were paid to divulge proprietary information. Indeed, Rajaratnam had assembled a stable of carefully curated industry moles. His favorite targets were South Asians like himself. Despite the stereotype of South Asians as hardworking grinds who eschew the sharp-elbowed politicking of their American peers, Rajaratnam knew they could be every bit as competitive as anyone else on Wall Street. Many Indians in finance had worked since grade school to gain entrance into the cutthroat I.I.T. system — which was far harder to penetrate than Harvard — before even landing in America. 

Even though he was from Sri Lanka, Rajaratnam made big gifts to Indian causes, and was a regular at exclusive Indian galas. He made his Indian informants feel so comfortable that they often sprinkled Hindi words like accha, or “O.K.,” into conversation. In India, where he would have been treated as an outsider, Rajaratnam’s approach would probably have fallen flat. But in the United States, such differences matter less. Rajaratnam made himself seem like one of them. “Raj sort of had a South Asian mafia,” recalled Gerald Fleming, a colleague from his pre-Galleon days. There were people he could call and “get, for a few companies, earnings to a penny.” Fleming recalled once sitting in Rajaratnam’s office when he logged a call to Advanced Micro Devices. After some time, Rajaratnam’s secretary came in and said that someone with an Indian-sounding name had returned the call. Rajaratnam picked up the phone, walked onto the trading floor and announced the profit figure. “And he was right,” Fleming said. 

Rajaratnam was also an expert at preying on his sources’ weaknesses. His first major target was an Intel marketing executive named Roomy Khan. He caught her attention by mentioning that his wife, Asha, was a Punjabi Indian, like her. Then he reeled her in by promising a well-paying job at Galleon in return for early readings of revenue indicators at Intel and, later, tips about acquisitions, like the Blackstone Group’s bid to buy Hilton Hotels. (She found out about the latter from a South Asian Moody’s analyst, a roommate of her cousin’s.) Rajaratnam also persuaded his old Wharton School classmate Rajiv Goel, a perennially frustrated executive at Intel’s treasury department, to feed him information in exchange for introductions to his high-powered friends. Rajaratnam’s most prized recruit, however, was Anil Kumar, a former classmate from Wharton and a graduate of the I.I.T. system who worked as a technology consultant at McKinsey. 

Kumar’s prickly manner had led to several career setbacks, including being passed over for the job of managing McKinsey’s India office. Rajaratnam shrewdly capitalized on his frustrations. When Kumar returned from India to McKinsey’s Silicon Valley office, Rajaratnam flattered him, asking lofty questions that the consultant readily answered. “I have all the brains, and you have all the billions,” Kumar was overheard saying to Rajaratnam. Feigning humility, Rajaratnam laughed right back. Then, one evening in the fall of 2003, as the two men were leaving a charity dinner in Manhattan, Rajaratnam pulled Kumar aside and offered him $500,000 a year to consult for Galleon. “You have such good knowledge that it is worth a lot of money,” he told him. Kumar, feeling underappreciated by his bosses at McKinsey, soon accepted. Then they found a way to pay him without ever tipping off McKinsey. Rajaratnam was now one step closer to the ultimate source of information — Kumar’s mentor, Rajat Gupta. 

As he had with his other informants, Rajaratnam began the seduction of Gupta by playing on ethnic ties and indulging his new friend during a rare career lull.

The CEO of Advanced Micro Devices was Hector Ruiz, a rarity in Silicon Valley because he's Mexican-American. Ruiz's name came up in amusing circumstances during Rajaratnam's trial.