Billionaire brown found guilty

Galleon’s Rajaratnam Found Guilty:

Raj Rajaratnam, the billionaire investor who once ran one of the world’s largest hedge funds, was found guilty on Wednesday of fraud and conspiracy by a federal jury in Manhattan. He is the most prominent figure convicted in the government’s crackdown on insider trading on Wall Street.

A brown man persecuted?I highlighted what I perceive to be the relevant part. Billionaire. If Raj Rajaratnam were being convicted of child abuse for having a son wear a dhoti or lungi I could see a “brown angle” on this. But Raj Rajaratnam is a billionaire who made his money playing the game of global capital. His brief was to create “efficiencies” by “allocating capital” more “rationally.” I won’t elaborate anymore because of my profound skepticism of the aggregate value of this sort of activity on the margin.

Rajaratnam played a high stakes game. He played it as a financial professional, not a brown man. The ‘brown mafia’ angle may have some legs in a narrow sense, but there’s a Harvard mafia too. But at the end of the day iBankers who can keep the H-bomb in their back pocket are a world away from Harvard grads working at non-profits. Similarly, management consultants, bankers, and hedge fund managers who find commonality or comfort in being South Asian are a world away from the Indian Culture Association. Let’s not confuse apples with diamonds.

As I have noted before the media representative who wanted me to address this from a South Asian perspective admitted he was having a hard time getting a brown on the show who wanted to talk about the impact of the case on ‘the community,’ as opposed to those who wanted to get the word out on the finance or management consulting perspective. Apparently financial folk and management consultants were worried about their reputation being further sullied. They need to consult the most recent social science. In the general social survey in 2008 20% of the sample had “hardly any” trust in banks and financial institutions. In 2010 that figure was 41%.The public long ago soured on the “masters of the universe.” We’re at a new equilibrium. They can have their dollars, or they can have their respect. But there’s no way they’re going to have both (want to take bets on what they’ll pick?).

If there is a South Asian angle on this, I would have to say that I did begin to wonder if my family had left one sort of corruption in Bangladesh for another sort in the United States in 2008 and 2009. Corruption destroyed the career advancement of many of my relatives in Bangladesh, and was one of the primary reasons that my father gave for wanting to start anew in the United States. The presumption in Bangladesh, and in much of the world, is that the high attain their positions through low means. The behavior of “the Street”" simply seems to have been a grander instantiation of that phenomenon.

As for Raj Rajaratnam I assume he’ll be taken care of. I don’t get the impression that his actions were qualitatively different from what is common in the construction of a “constellation” of information for the purposes of investment in high finance. So even if I shed tears for him as a brown man I would rest easy. Capital and politics may pretend to throw one to the peasants, but at the end of the day they take care of their own for committing crimes which they all partake in.

22 thoughts on “Billionaire brown found guilty

  1. He was a “brown” man being prosecuted by another “brown” man – US Attorney Preet Bharara.

  2. Um. You completely miss the most interesting part of this story. We have now reached the point in the USA where a “brown” bad guy is being prosecuted by a “brown” good guy. Leaving this point out of your post makes your whole story utterly pointless.

  3. “Leaving this point out of your post makes your whole story utterly pointless.”

    Incomplete – perhaps. Pointless – no.

  4. They found Sanjay Kumar, another Sri-Lankan, guilty as well. He doesn’t exactly live in a cardboard shack now. The first ‘brown angle’ I can think of is that if you were Tamil Sri-Lankan and had moved to NYC in the hopes of making it, Rajaratnam’s name and biz might have been the first name thrown your way. The other would be that the incentive for smart brown people to cultivate information networks which skirt the legal grey area of ‘insider trading’ is no less considering that Rajaratnam will still be a billionaire after being convicted.

  5. Um. You completely miss the most interesting part of this story.

    oh thanks for telling me what to think!

  6. I have been wondering if someone is going to make a case of him being a sacrificial lamb offered by Wall Street, after all he would still be an outsider in the power club.

  7. I have been wondering if someone is going to make a case of him being a sacrificial lamb offered by Wall Street,

    i was thinking about exploring that angle. i don’t know enough to comment. but if he’s the sacrificial lamb it doesn’t move me. live or die by the law of the brutal jungle. the whole enterprise is corrupt at this point in the moral and ethical level, if not on the legal one. he’s smart enough that he could make a good living being a middle class professional.

  8. after all he would still be an outsider in the power club.

    ok, i followed the link. it’s 5 years old. a lot has changed. for example, vikram pandit is CEO of the biggest too big to fail (repeat offender i believe, as institutionally its predecessor had the same issue in the early 1980s latin american debt crisis, right?), while neel kashkari famously implemented the governmental power elite’s love letter to the capital power elites (naturally kashkari moved from capital to “public service” back to capital with ease).

    i think my biggest point is that ethnicizing the titans of high finance is mislreading and shows we’re too wedded to the ethnicity-uber-alles model. i gave a scientific talk to a prominent hedge fund before the financial crisis and i think i can divulge that the analysts that firms like galleon hire are quite diverse, including at the managerial level. by diverse i mean lots of brownz, east asians, jews, and WASPs, as in the descendants of the east coast establishment. many were foreign born. hank paulson, john thain, and jamie dimon are “white males” who head or headed major financial firms. fair enough. but that sort of reduction shouldn’t blind us to the fact that they really have very little ethnically in common with a white male who works as an insurance salesmen in springfield, missouri.

    i think a similar skeptical analysis has to work when it comes to “our kind of people” who are caught up in the “great game” of capital. i know some colored people do argue that we need to defend “our people” like “the jews” do. this is the same zero-sum thinking that produced the malthusian subsistence world for thousands of years. if the system is not fixed then what is good for “our people” is totally irrelevant. did my dad get a stipend from the help-brown-people-out-of-work fund a few years back when he was laid off? nope. nor did he expect too. just how it rolls. let’s just let it roll for brother raj.

  9. Although Rajaratnam is wrong and guilty, I feel that he’s also being scapegoated. There is so many cases of insider trading, but why do we all see only his image? Moreover, George Soros ADMITTED and was FINED for insider trading to the tune of $2.3M some times ago (http://en.wikipedia.org/wiki/George_Soros#Insider_trading_conviction ) . There are so many crooks in Wall Street, but only this guy’s picture is up everywhere like a Warhol lithograph.

    At one level, a trader who’s made $10M/year, an insider trader, an iBanker who’s made this amount, and a serial entrepreneur who cashes out every time a company goes public (but subsequently fails) is all guilty of a new form of usury. They’re all equally guilty, and only a few of us are invited to this exclusive club to partake in this crook’s game.

    • Was it a case of the SEC not being able/willing to use wiretaps in the past (before Rajaratnam)? Because, I think, this is the only way you can provide incontrovertible proof of insider trading and, if i’m right, it’s more likely Raj was hit a perfect storm. That whole counterfactual regarding whether X prominent white banker would not have been investigated and prosecuted to the same degree as Rajaratnam if they did the same thing isn’t useful because although they’re all very wealthy, Jamie Dimon (and Pandit) can call on congresspeople and the white house while Raj probably didn’t ever need to in order to make his money.

      • i thought the hedge fund guys avoided some unfavorable taxes in part because they gave so much money to democrats historically? it’s known that obama got a lot of that in 2008 (quantitative analysts from science backgrounds were surprisingly pro-obama when i was taken out for dinner and drinks in 2008 if they were american born [foreign born ones didn't seem to care much about american politics]).

  10. and a serial entrepreneur who cashes out every time a company goes public (but subsequently fails) is all guilty of a new form of usury

    most firms don’t generate positive externalities (spillover effects). but a small minority do. it isn’t implausible that a serial business person who cashes out and has all the firms fail after leaving is a person who wants to make a difference, but ends up failing. most people who want to make a difference in the world in business fail. it’s a power law distribution. i think the late 90s bubble is a classic case of a lot of shysters getting rich (e.g., mark cuban to be frank), but, a few of the firms remain around today and are critical parts of our lives and increase aggregate human utility.

  11. My takeaway: To be a billionaire, you may need to play in the gray. To play in the gray, don’t get caught. To not get caught, don’t give anyone any reason to single you out. To not get singled out, don’t be brown.

  12. As an Indian I can take some little comfort that Rajaratnam was not Indian but Sri Lankan. But the biggest disappointment was that Bengali Rajat Gupta ex CEO of McKinsey & Company was involved in this mess. These are wealthy intelligent people but yet they used unsecured/unencrypted modes of communication to plot their evil . Even the uneducated Taliban know better. I heard some of the tapped phone calls that the prosecution used on the nytimes site and the only precaution they took was that one guy spoke softly (his children in the background were making fun of him for that).

  13. I find desi unity to be elusive; IIM/IITs cling to each other to the exclusion of other desis. But then again there are a couple of banks in Londontown (Deutsche, UBS, Lehman) which have a very desi tinge (Deutsche particularly under Anil Jain).

    Its seems the global elite becomes post national and to some extent post-racial methinks.

    • (Deutsche, UBS, Lehman)


      Yes, Lehman is a great example, given how it no longer exists. Why do you constantly make sh!t up??

  14. I can’t help but find it interesting that so many white Wall Street crooks have gotten away with actions that have helped destroy the economy, and yet the courts have the wherewithal to prosecute a brown suspect.

  15. someone do at least a descriptive count of indictments of demographic breakdowns since 2008. otherwise shut up.

  16. comments implying that raj is being targeted because of his ethnicity need to be accompanied by some datum or rationale why this is a plausible position from now on.

  17. Michael Milken looks like a saint compared to a lot of these execs from the last decade. at least Milken showed some contrition and remade his life. A lot of these execs just lack total shame. And no, I don’t think race had little to with the four eyed tubby’s arrest.

  18. Rajaratnam is one brown man among 1.5 billion. He is one Wharton grad among a few tens of thousands. (Like Millken.) Likewise, Rajat Gupta graduated from HBS, like so many other scumbags.

    I may be brown, but I don’t deserve to be tainted by association with them.