“UNEVEN JUSTICE”, by Raj Rajaratnam – The Plot to Sink Galleon. Book Launch
“Truth will ultimately prevail, where there is pains to bring it to light “, President George Washington, Founding Father of the United States of America.
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The inside story of a case that illustrates the horrific perils of unchecked prosecutorial overreach, written by the man who experienced it firsthand
In October 2009, I was arrested and charged with insider trading. I chose to fight the charges
against me because I was innocent.
The prosecutors alleged that 0.01 percent of all my trades between 2005 and 2009 were illegal.
I understood that in the US, there is a 97 percent conviction rate (similar to China and Russia) and a punitive trial penalty for those who dare to go to trial. Empirical studies have shown that the trial penalty is just about double that handed to those who plead guilty. If a defendant agrees
to become a cooperating witness, helping the government with testimony—regardless of the truth—to convict another defendant, the cooperating witness gets a much-reduced sentence and in many cases, just parole.
I understood the stakes. I chose to go to trial. Why? It’s a question I’ve since been asked hundreds of times. Why? Why jeopardize everything? Because to my core, I believed I would get a fair hearing. And with a fair hearing and a rational exposition of the facts, the truth would have prevailed. Until my arrest, I had the highest regard for the Department of Justice (DOJ) and the Federal Bureau of Investigation (FBI). Until 2009, I believed that most Americans felt that way. Since then, of course, the American public has become jaded about the sanctity of these institutions due to multiple examples of overreach and excess. Certain DOJ and FBI sections operate, each attempting to further its own agenda, with no regard for Constitutional checks and balances. The terms “fake news,” the “Dark State” are now bandied about with almost wild abandon, humor, and satire. The public now assumes the existence of “fake news” alongside “authentic” news with little effort toward journalistic integrity.
During the time of my arrest and trial, information from the media, DOJ, and FBI was absorbed with unquestioned “Trust,” although some would argue that the Dark State had existed for many years. While I still believe that the vast majority of those who work for the DOJ and the FBI are people of integrity, this book is an attempt to shed light on the corrupt few who act with impunity and destroy lives and families to further their career ambitions. From the moment of my arrest, the narrative of my story was recast with a precise agenda shaped to direct public attention away from the stark horror of the 2007–2008 financial crisis while promoting media idolatry of the publicity-hungry and ambitious rookie U.S. Attorney Preet Bharara, who became a demigod, the “Sheriff of Wall Street” riding into battle against me, a villain relentlessly personified as evil incarnate on the front pages of every major newspaper
around the world. Wanton disregard for the law, acknowledged by the judge at my trial, allowed a corrupt element within the FBI, Agent BJ Kang, to falsify
documents leading to my arrest and falsify testimony leading to my conviction. I faced prosecutorial misconduct at its finest.
The overzealous media, feasting on a human story they could sell every day, also profoundly
prejudiced any hope of gathering an impartial jury by the time of the trial. These three institutions, ostensibly guardians of the public interest, charged with impartiality and integrity, bore down in a concerted campaign to make me the face of the financial crisis.
My arrest and subsequent trial, a two-year process, deflected attention from a glaring fact: not one major banker was held accountable for the 2008 global meltdown. No arrests. No searing prosecution. No jail time.In the midst of a financial crisis that brought a multitrillion-dollar world economy to its knees, these three institutions, independently and collectively, targeted a tiny slice of the U.S. financial
industry, hedge funds; honed in on a single hedge fund, Galleon; isolated only me, its CEO, who had recently become one of the few immigrants on Wall Street to be identified as a billionaire; and built a fabulous and intricate tale of “sex, drugs, and rock ‘n’ roll” to entertain the public and build their own reputations. Their two-year reality series was successful beyond measure. Preet Bharara, then the US attorney for the Southern District of New York (SDNY), used my prosecution to launch an unprecedented press campaign to promote himself.
Bharara ran roughshod over the truth, standard DOJ protocols, and the office’s own dignity in his extraordinary zeal to convict me. Time Magazine put Bharara on its cover, their headline proclaiming “This Man Is Busting Wall St.” It was Preet’s finest moment. Bharara did not touch the real perpetrators of the 2008 financial crisis: Wall Street’s top bankers. In 2014, in a rare moment of sheepish public acknowledgement, both Bharara and the influential New York Magazine observed that the insider cases—“made our careers, but they (didn’t) change the world.”
Bharara’s impotent and poisoned approach to the non-prosecution of criminal activity on Wall Street—ranging from the mortgage bankers who precipitated the financial crisis (Goldman Sachs, Lehman Brothers), the money-laundering of drug cartels (HSBC), and the encouraging of
tax evasion by U.S. citizens (UBS, CSFB)—is now the defining legacy of his tenure. Each of these firms settled civil charges by paying billions of dollars in fines using shareholder money, but not one single person was criminally charged or individually fined. Every one of the insider trader prosecutions was criminal. The towering hypocrisy remains startling.
The prosecution under Bharara’s watch advanced a theory of trading to prosecute me and several others that the Appeals Court of the Second Circuit subsequently overruled, criticizing it for “doctrine novelty.” Soon after my trial in May 2011, then SEC Commissioner Mary Shapiro gloated that “the beauty of insider trading laws is the flexibility in interpreting them.”
The lead prosecutor in my case, Jonathan Streeter, said in December 2012, “Insider trading cases are confusing to investment professionals.” He went on to add, “There is incredible confusion on what is illegal and it’s a real problem. The law is very complicated and the lines are a bit
murky.” A U.S. attorney, the prosecution in my trial, and the head of the SEC all acknowledged their reservations about a “murky” set of laws but had no “murky” reservations using them liberally in my case and at my trial.
The FBI agent overseeing my case, Special Agent Kang, lied on his sworn affidavit to obtain wiretap authorization of my phone. Recognizing there had been government misconduct, Judge Richard Holwell, who presided over my trial case, issued a searing criticism of the wiretap
application used by Agent Kang, reprimanding him for “reckless disregard for the truth with respect to both probable cause and necessity.” The judge went on to add that “false and misleading statements and omissions pervaded the affidavit [submitted by Special Agent Kang]
so extensively that it was impossible for the authorizing judge to have the constitutionally required determination for the issuance of the wiretap…rather than provide a full and complete statement as required by the law, the wiretap affidavit made full and complete omissions and included literally false information.” Kang did not stop at blowing through truth on paper. He menaced and threatened my family and employees with prosecution, frightened away crucial defense witnesses, and routinely leaked false information to the media, churning up an unabated feeding frenzy that shredded me in the court of public opinion. Kang took his cues from the playbook of publicly reviled former FBI Director J. Edgar Hoover.
I was tried, convicted, and sentenced in the press even before I fully understood the charges against me. The atmosphere was so toxic that my lead counsel, veteran defense lawyer John Dowd, said “the prejudicial publicity orchestrated by the USA was so palpable in the courtroom…It was the most toxic atmosphere of any case I ever tried.”
My defense team led by John Dowd, along with expert testimony from a former SEC legal counsel, repeatedly highlighted that all the information discussed in the wiretaps was already in the public domain. Every bit of information was in the public domain. It did not matter. No
amount of truth could overcome the false testimony trained into the cooperating witnesses by Streeter, his team of prosecutors, and Bharara, who sat on the sidelines, waiting in eager anticipation for any opportunity for a press conference. Each of the cooperating witnesses had
committed his own set of crimes unrelated to Galleon. Yet each chose to testify against me as an opportunity to reduce their probable and respective sentences. That they were perjuring themselves was irrelevant; the government coerced them into an immediate mandate to take me
down. Even the government’s star witness, Anil Kumar, offered damning testimony under oath in my case only to recant the very same sworn testimony three years later during the trial of my brother. My brother was subsequently acquitted as a result of the revised and opposite version of Anil Kumar’s testimony. A few newspapers picked up on this gross disparity, but that was the extent of the reaction—the courts rejected our attempts at a formal hearing. The fact of perjury had no
consequence. The cycle was vicious. “Innocent until proven guilty,” the cornerstone philosophy of the American judicial system, was proving to be a farce. I was convicted by a jury, sentenced to eleven years in jail, and paid fines of over $150 million.
The irony is that even in setting the fines, the prosecutors working in tandem with the media kept up the unceasing drumbeat of punishment for the financial crisis. Never mind that I did not personally make any money from the alleged trades. And never mind that not one single investor sued me. Galleon went through an orderly process of closing down the firm and returned all investor funds including a gain of 22 percent. Not a single investor lost money. Most important to me, personally, was that not one single investor sued me.
In July 2019, I was released after serving seven and a half years of my eleven-year sentence under the First Step Act.
I wrote this book entirely in prison and by hand. I began by writing about an hour a day. Soon that increased to two hours. Then three. I am choosing to publish the book for two specific reasons: first, I want my peers, professionals who understand the nuances of managing money, to
hear the facts of my case. I want them to judge me. It is my assertion that I was entrapped, framed, unlawfully wiretapped, surveilled, and then made to endure a brutal and very public media lynching.
Second, and more importantly, I want to begin a public discussion by creating awareness of how certain corrupt prosecutors and FBI agents are allowed to get away with criminal behavior. There are no checks and balances in our justice system. Recently there has been a lot of discussion as to whether the president should be above the law. The president is so closely scrutinized that doing anything against the law would ring alarms bells the world over. Instead, my assertion is that the focus should be on the corruption within the American judicial system, on a handful of corrupt U.S. attorneys who live their lives exempt from the law by which they control the lives of others and the rest of the country. In this book, I will show how ambitious prosecutors actively take advantage of murky laws and coerce testimony from government witnesses to obtain wrongful convictions. Winning at all costs, regardless of the truth, appears at every level to be an operative mantra. I realize there is only one book I can write to set the record straight. This is it.
My story is also about greed. In all its forms, greed boils down to avarice, hunger, power, money, ambition. All of these are readily available and identifiable in the financial industry, by definition. In fact, I would say that in the financial industry, greed is effectively a cliché with fear
being on the flip side of a pair trade. Fear and greed are easy to communicate, and the media homes in on these aspects of Wall Street. But what I would like to do in this book is to home in on the excess and greed in the judicial system. Ambition in the judicial system also translates to
power and money, a far more insidious and dangerous consequence to society because it goes unchecked. After I was convicted, the press had a field day speculating whether the new sheriff of Wall Street, Preet Bharara, was actually in line to succeed Eric Holder as the next U.S.
attorney general when Holder stepped down. Although Bharara was at first coy about his intentions, he eventually made clear his goal to secure the job based on his work prosecuting Wall Street. He may have wanted the job but did not get it.
The same ambitions were true for the three government prosecutors in my case—all three left government shortly after closing out my case for higher-paying jobs as partners in leading law firms. They and their new employers spent considerable effort drumming up business on the heels of the skills honed during their time as former prosecutors to future defendants accused of insider trading. They had no problem making the transition from denouncing apparent “greed” in the financial markets to defending that same greed, switching sides in an effective demonstration of greed. As partners at leading law firms, they would be highly compensated. The “protectors from greed” sold themselves to the highest bidder, all under the trusting gaze of an unaware public. The door meant to separate and maintain a balance between the public and the private sectors revolves efficiently and profitably.
It is important to understand context of the time and the prevailing mood of the country in October of 2009, when I was arrested. In 2008, we had seen the near collapse of the financial system and the wiping out of trillions of dollars of home equity and life savings of the American middle class. The government was forced to bail out the major banks. An estimate $7 trillion in U.S. household assets were wiped out. The public was clamoring for blood and there was no
blood forthcoming. From anywhere. I had nothing to do with the housing crisis. I was an easy target for politicians, for prosecutors, for pundits, and for Bharara, who had just been handed leadership of the Southern District of NY, including a mandate for bringing Wall Street under control. I was a successful and expendable hedge fund manager who employed just 250 people. We obtained an overwhelming amount of information on a daily basis and my trading was 100 percent consistent with the written recommendations of my analysts. In all cases, I had a preexisting position in the stock before allegedly receiving the “tip.” In 2009 and even today, insider trading laws are murky at best and often (intentionally) misinterpreted by prosecutors. The government painted our systematic, well-researched investing as being criminal. Theirs was an overreach of enormous proportions to show that Wall Street fat cats were being brought to justice. If I am guilty, then the entire investment business should be declared illegal.
As the Wall Street Journal noted insightfully,
“Under standard rhetoric, the public is somehow cheated by all this, but the standard rhetoric is nonsense. The public isn’t damaged because another party wants to sell or buy (and most hedge funds strive to make sure their trading doesn’t affect prices anyway). But a cynic might note one thing: insider trading law provides a bottomless reservoir of (supposed) financial ‘crime’ for Washington to investigate whenever it needs a Wall Street prosecution to flounce in front of the press.” 1
As a child, having gone to boarding school in a foreign country at the age of eleven, I learned quickly and early to be a fighter, a scrapper. This is a blessing and a curse. Over the years, I have learned that you don’t always have to fight. The kindness of many people has defanged and
disarmed me to a large extent. However, when people try to take advantage of me, I have to respond. I don’t back down. And I am fortunate to have been blessed with the mental fortitude and financial resources to fight for my innocence. Too many people do not have these things. They plead guilty to indictments they cannot challenge. In my experience, about 10 percent of the inmates at the prison in which I spent seven and a half years were innocent.
When I was researching the Justice Department while in prison, I came across a paragraph that struck a chord in me. Unfortunately, I did not write down the name of the author or the source. “Criminal punishment is the greatest power that governments use and wield against their own
people. When employed justly and appropriately, it is vital to any safe and productive society. But when employed aggressively based on vague laws and personal agendas the criminal justice system unnecessarily destroys lives, livelihoods, and families.”
Oddly, my experience of the law has left me without rage or a sense of victim hood. Although I would never say I am grateful for the experience, I can say with confidence that I like myself better because of it. When I finally broke
through the wall of despair, I realized I had gained a
sense of peace and awareness that had opened me up and cracked me free. I realized how incredibly strong the human mind is and that nothing can beat a person who refuses to be beaten.
Finally, I want to say that despite what happened to me as a result of a corrupt prosecutor, I love this country just as much as I did before I went to prison. I feel truly blessed to be one of the 5 percent of the world population who live in America. I do not see people lined up to immigrate to China, Russia, or Japan, for example.
As I reflect on my circumstances and my past, I’m confident that if God had arrived at my doorstep—with a crystal ball—when I was eleven and told me, “Raj, I will give you the wife and children you see here, these friends, ensure that both your parents live long and happy lives, and give you also the ability to help the less fortunate, but you need to sacrifice about seven years of your life,” I would have taken that deal in a New York second.
I feel very fortunate.
I am very fortunate.
1 “Is Title III Dead? The Future of Wiretap Challenges in the Wake of Rajaratnam,” The
Champion NACDL, September/October 2013