Image by james.gordon6108 via Flickr
Raj Rajarantnam did not testify at his own trial. Say what you want he was found guilty. Was he blackmailed by the Tamil Tigers into putting up a huge million dollar donation? Al Qaeda have been known to strong-arm donations from other wise moderate but prosperous Muslim business men.
When Raj was arrested he was found with airline tickets taking him back to Sri Lanka. For those of you who do not know. The Tamil Tigers were defeated militarily after a protracted civil war. Not sure how the victors would feel about their former enemies big financial backer trying to come home.
Not sure if the US Marshalls office knows where all the liquid assets are.
Image via Wikipedia
Insider trading king Raj Rajarantnam gets 11 long ones. Anything under 10 would be minimum security camp cup cake. 11 is significant. Strong message to insider trading aficionados. The concierge service gets special in some of these places.
What was Raj Rajarantam’s first mistake? Every criminal usually rethinks it all, trying to see where he/she made the critical mistake. Wall Street has forgotten that he first went on the radar because of million dollar contributions to a terrorist organization called Tamil Tigers.
The other contributors were mom and pop stuff. $50 bucks here. $100 bucks on pay-day. Nickels and dimes that was not worthy of prosecution. A million dollars may seem small for Raj but it stuck out like a sore thumb. As anti-terrorist officers tried to figure out who he was, they eventually turned to the SEC and the DOJ.
If it wasn’t for that critical error Raj would have stayed off the radar. Perhaps never even being caught. So the lesson for insider traders is do not donate to terrorist causes, Duh!
Is there any follow-up needed from an anti terror point of view?
Raj Rajaratnam was 100% convicted of insider trading. None of the charges were dismissed. The message to white collar criminals. Don’t do the crime if you can’t do the time. The deterent effect will sweep over the financial community. So where does John Dowd come off making rude gestures on CNBC cameras and making injudicious comments to a live microphone.
John Dowd represents the delusional side of the legal community which is so confident in their ability to get clients off they expect judges and juries to fold like cheap suits. John Dowd made enough miscalculations to actually delude himself. When he was faced with the cold harsh reality of defeat he just lost it. So great was his contempt for the law and legal process. So great was his shock with reality. So great was his poor judgement in giving CNBC a look into his inner psyche.
While the financial community got the big message, the legal community received a bigger one. The message was stillborn in the juries verdict. You cannot get your clients off. The value of a lawyer to a white collar criminal is now much dimished. My lawyer can get me off type of thinking is now suicidal. To John Dowd that is a huge revealation.
Clearly Proctor & Gamble (NYSE:PG) is embarrassed by Rajat Gupta. So are American Airlines (NYSE:AMR) and consulting giant McKinsey & Company. Goldman Sachs (NYSE:GS) is of course livid. Warren Buffett who likes to invest in good people is just plain scratching his head.
Rajat Gupta says he resigned in part to avoid further distraction. Rajat today you are the top business news story and we could use a good distraction. Here is what American Airlines, P&G and McKinsey must be doing. A massive rear view forensic audit to cover their butts just in case this is not an isolated instance. Because you just never know. The scope of these investigations will be huge as they cover decades of Rajat Gupta involvement. It all becomes a case of who knew what and when. Could be the largest game of Blind Mans Bluff ever played on Wall Street.
The problem becomes what if you uncover something and find you did nothing about it. Certainly a governance failure which looks inexcusable. The reverse will be what if you find nothing wrong and then realize following SEC charges you missed copious amounts of malfeasance. This makes up massive failure which is very hard to admit to. No way to look good. Wondering how they will spin the mea culpa’s?
Right now I am glad not to be in the Directors & Officers (D&O) Liability insurance business. Hey didn’t AIG have a big slug of D&O exposure.
Disclosure: “George Gutowski” writes from a caveat “emptor perspective”. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.