Raj Rajaratnam
“Facts are stubborn things,” a great American said a long time ago. “And whatever may be our wishes, our inclinations, or the dictates of our passion, they cannot alter the state of facts and evidence.” Wiretaps are also stubborn things, as the conviction of Raj Rajaratnam on Wednesday demonstrates.
Although Rajaratnam never testified at his trial, the jurors heard his voice on dozens of tapes, and they did not paint a flattering portrait. The tapes proved that the defendant had a lot of pipelines to information that would help him invest shrewdly and add to the several billion dollars in his fortune — add to it illegally, the jurors concluded, as they found him guilty on all 14 counts of securities and securities fraud that his legal team tried to knock down.
“I heard yesterday from somebody who’s on the board of Goldman Sachs that they are going to lose $2 per share,” Rajaratnam said to one of his employees in advance of the bank’s earnings announcement, as The New York Times recalled on Wednesday.
“One thing we know, this is very confidential, someone is going to put in a term sheet for Spansion,” he told a colleague, referring to a proposed acquisition of a technology company, The Times noted.
And another damaging quote, this one by a tipster telling Rajaratnam about an upcoming deal: “So yesterday, they agreed on, at least they’ve shaken hands. So I think, uh, you can now just buy.”
The defense was unable to deflate those quotes, unable to persuade the jurors that Rajaratnam was only doing what a lot of successful investors do: building a ‘mosaic” of information from bits of data that really were “public,” one way or the other, at least for people smart enough to discern the puzzle pieces.
In fact, the prosecutors never said that all of Rajaratnam’s riches came from insider trading, only that some did. So they gave jurors more than 40 wiretaps, and told them they proved that the co-founder of the Galleon Group LLC hedge fund gave and received inside tips about major technology companies and banks.
At least one former prosecutor in the Southern District of New York was not surprised by the conviction. Daniel S. Ruzumna, an assistant U.S. Attorney in the Southern District of New York for six years and head of its major crime unit before joining Patterson Belknap Webb & Tyler LCP in New York, saw the verdict coming when the jurors kept asking to hear the tapes again.
A particularly good omen for the prosecution, Ruzumna said in an interview with Bloomberg several days ago, was the jurors’ request to hear tapes on which Rajaratnam was heard discussing ways to cover his tracks. At least since the Watergate era, we’ve heard the idea that the cover-up can be at least as dangerous as the crime.
Not that there weren’t some nervous moments for prosecutors. One of the original jurors was removed for medical reasons, requiring a replacement — and a whole new start to deliberations. And the newly constituted jury, like the original one, kept asking to hear the tapes over and over, tapes of Rajaratnam’s one-time friends engaging him in incriminating conversations. (A score of those former friends have pleaded guilty, while a few others await trial.)
The 53-year-old Rajaratnam was arrested in October 2009 and charged with profiting by $63.8 million from tips leaked by traders, corporate board members and other insiders. Now that he has been convicted, he faces the prospect of going to prison until he is in his 70’s, although he is expected to appeal.
Why the billionaire Rajaratnam would engage in such reckless behavior for a “mere” $64 million or so (the figure varied throughout the trial) remains unanswered. Perhaps, it has been suggested, he did so simply because he thought he could get away with it. He has been described as super-ambitious and competitive — has anyone ever heard of a laid-back billionaire? — and the same qualities that brought him riches have now brought him ruin.
As terrible as the verdict was for Rajaratnam, it was surely elating to U.S. Attorney Preet Bharara, who has made Wall Street mischief a signature issue. “He let greed and corruption cause his undoing,” Bharara said after the verdict, vowing to pursue other white collar criminals who think they are “above the law and too smart to get caught.”
The verdict was also a blessing for the entire Department of Justice, which has suffered some embarrassments of late.
As the jurors listened to the tapes, again and again, perhaps the prosecutors were worried that they had given the panel too much information. Perhaps, the prosecutors worried that the jurors were dissecting the tapes in search of exculpatory ambiguities. But, apparently, the jurors just wanted to be sure that the tapes were as incriminating as they sounded.
And they were.
As for the great American who said that “facts are stubborn things,” that was John Adams as he defended eight British soldiers indicted on murder charges for killing five colonists in the “Boston Massacre” of 1770. Look dispassionately at the facts, he urged the jurors. There was no “massacre.” It was an instance of frightened soldiers sho0ting at an angry mob after extreme provocation.
Adams won acquittals for most of the soldiers, and convictions on lesser charges for the others. The facts were on the side of the defense.
Alas for Raj Rajaratnam, the facts were against him — as his own voice proved.
