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The fraud-buster

It was late in the afternoon. And the stock market was about to close. Rajat Gupta got off the phone ending a conference call with the rest of the Goldman Sachs Board. They had agreed to a $5 billion investment from Warren Buffet’s Berkshire Hathaway. But there was an urgency in Gupta’s office. His assistant placed a call to Raj Rajaratnam, chief of hedge fund Galleon. Yashwant Raj writes.

world Updated: Feb 12, 2012 01:56 IST
Yashwant Raj

It was late in the afternoon. And the stock market was about to close. Rajat Gupta got off the phone ending a conference call with the rest of the Goldman Sachs Board. They had agreed to a $5 billion investment from Warren Buffet’s Berkshire Hathaway. But there was an urgency in Gupta’s office. His assistant placed a call to Raj Rajaratnam, chief of hedge fund Galleon.

The time was 3:54, 16 seconds after the Goldman Sachs call.http://www.hindustantimes.com/Images/HTEditImages/Images/12-02-pg14a.jpg

Gupta spoke to Rajaratnam very briefly. At 3:58 pm, just two minutes to the close of markets, Rajaratnam instructed his fund managers to pick up 217,200 shares of Goldman Sachs’s common stock for $27 million. The investment bank announced the Berkshire investment later in the evening. When the stock market opened the next morning, September 24, 2008, Goldman Sachs shared were up $3 each.

Rajaratnam dumped all the 217,200 shares he had bought the previous evening taking in a profit of $840,000.

Gupta, a first generation immigrant from India is facing charges of insider trading — for allegedly tipping Rajaratnam, who is serving a jail term of 11 years — brought against him by a team of prosecutors led by another first generation Indian immigrant.

Enter Preet Bharara, the US attorney for Southern District of New York. He is the man who set up the wire-tap on Rajaratnam, a tool increasingly
associated with him, ensnaring more insider trading criminals than ever before.

Bharara is the man behind a wave of insider trading arrests and convictions that have swept Wall Street, home to the world’s mightiest financiers and bankers. And Ground Zero to the economic slowdown afflicting most of the world, the US and Europe being hit the hardest. Wall Street is in the doghouse, and America believes it has a Dog Whisperer who can discipline the unruly money guys.

TIME magazine put Bharara on the cover last week — still the ultimate trophy in some parts of the world — saying Bharara is going after those who caused the meltdown. He is the man avenging the death of prosperity in a dark alley off Wall Street.

Bharara has brought to trial 63 people for insider trading and other stock-related frauds and won 56 convictions so far, including that of Rajaratnam and two of his Indian accomplices Anil Kumar and Rajiv Goel. No losses.

Sandeep Goyal, a Manhattan analyst, charged in December for trading along with six others is among those who have pleaded guilty and agreed to help authorities convict others in the network — which Bharara called a “corrupt circle of friends who formed a criminal club whose purpose was profit” — charged with making $78 million using inside information on Dell computers and Nvidia.

Last week, Bharara charged three top executives of Credit Suisse — Kareem Serageldin, David Higgs and Salmaan Siddiqui — with fraudulently inflating the prices of asset-backed bonds which comprised subprime residential mortgage backed securities and commercial mortgage backed securities in Credit Suisse’s trading book in late 2007 and early 2008.

Bharara, the man
The TIME magazine interview was a rare exception made by Bharara, who is said to be so ferociously
private that he is known to have sent his best friend and deputy to speak on his behalf to persistent reporters. He fights publicity almost to the point to appearing shy, which he is not.

Bharara is a lawyer. Born in Punjab to a Sikh father and Hindu mother, Bharara came to the US when his
family emigrated. He was only two then. He and his brother Vinit, grew up in New Jersey — that may perhaps explain why he loves Bruce Springsteen,
another New Jerseyan.

Bharara showed early signs of a man with strong convictions. Barbara Tomlinson who taught Bharara American History and American Literature at The Ranney School told a New York radio station how he took up for her when she was fired for insubordination. Bharara had been accepted at Harvard then, and any trouble at school, Tomlinson warned him, could jeopardise it. Undeterred, he collected a band of friends and marched into the principal’s office to argue Tomlinson’s case, unsuccessfully, it turned out but Tomlinson won’t ever forget the gesture.

Both Preet and his younger brother Vinit studied law — Columbia school for Preet and University of Pennsylvania for Vinit. They both joined law firms and then their paths forked: Preet joined the Southern District of New York attorney’s office, considered the toughest in the country, and Vinit started an online diapers retail company that was snapped up by Amazon.com for a half a billion dollars.

Bharara likes to defer to his younger brother as the more successful, but the world can’t get enough of the senior Bharara, it seems, for now.

Really successful?
To hold Bharara up against the legend building around him, he has not yet caught any of the big players largely held responsible for the meltdown. The cast of Too large to fail — the iconic book about the onset of the financial crisis and government’s response to it — remain at large, minus their fancy jets and yachts. But free. Gupta and Rajaratnam played almost no role in the recession, neither did David Higgs.

So what makes Bharara such a superstar?
A country feeling let down by a profligate Wall Street needed an angry Amitabh Bachchan to crash the party. Preet Bharara, the blue-eyed, tall and handsome Harvard graduate with a good feel of the mean street, came along, swinging his baton. And the country fell in love with him.