For some reason I can’t hate on Raj Rajaratnam. He used insider trading to make money, but it’s not like he raped the global financial system like the big banks. I mean, they give Raj 11 years and bail out people that actually inflicted global suffering. Anyways, The Beast has a great interview with the Raj. Most interesting, he says he’s not a snitch, and that he pushed the case on his astrologer’s advice.
Here’s some money quotes:
Not A Snitch
“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.”
Earlier we’d been discussing Velupillai Prabhakaran, leader of the Tamil Tigers. In his final days, Prabhakaran, too, was under a form of house arrest in his bunker, where he spent his time cooking Chinese meals. When his body was found, it was obese. Prabhakaran had wanted nothing less than total independence, but the Sri Lankan Army put paid to that idea, brutally, in 2009. “Clearly, we lost,” Rajaratnam says. For a second, I’m not sure who he’s talking about: Prabhakaran and the Tigers, or himself. Both of them held out for the maximum. They put up a fight and were wiped out.
On Ola Leaves
And at the end of the ola-leaf reader’s tape, the astrological conclusion heartened him. “He said that eventually I would prevail.” 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.
He’s also got some interesting comments on how if in Sri Lanka he could have just given the judge Rs. 50,000 (I think it’s gone up) and been having lunch with him the next day. He said the US Justice system is by and large fair, but I think the regulation isn’t. Any firm with knowledge and contacts is doing some form of insider trading, if they just went by public knowledge what advantage would they have?
We can see the absurdity of the general view of “insider trading.” There is a whole literature on the economic analysis of the subject, and economist Alex Padilla’s 2003 dissertation defended the practice from a specifically Austrian angle. In a nutshell, insider trading is beneficial because it moves market prices closer to where they ought to be. Those profiting from “inside knowledge” actually share that knowledge with the rest of the world through their buying and selling. (Ludwig von Mises Institute)
DealBook also hems and haws on the issue, but concedes that it’s still essentially a victimless crime. While he and chaps like Rajat Gupta undoubtably violated client agreements, it’s not like they, say, broke the global financial system and impoverished millions. And the guys that snitched got off. Look around and see that bad financial decisions and fraud have left millions of people out of their homes and thousands occupying Wall Street and cities around the globe, and Raj begins to look like a hal maso. Small fish fried to a crisp.
Anyways, read the interview, lot of personal detail from Suketu Mehta