Monday, June 20, 2011
The New Yorker has a very good piece running down the whole Galleon insider trading story. You read the whole thing home, but if you can't, read this. It's got everything in just a couple of paragraphs - wires, prepaid phones, and trading on your own account minutes after getting inside information...
In October, 2009, Rajaratnam and Kumar flew to Trinidad with their wives to attend a wedding. On their way home, they stopped in Miami to spend two days at Rajaratnam’s beachfront condominium. On the evening of October 6th, the men went out in Rajaratnam’s boat, then returned to shore and took a swim. They were lounging on deck chairs, reading and chatting, when Rajaratnam’s phone rang. Excusing himself, he walked down the beach to talk. Five minutes later, he came back, excited. “That was a Cisco executive,” he said. “Cisco is buying Starent”—an information-technology company. Kumar had never heard of Starent, and he wondered which Cisco executive was calling Rajaratnam.
Rajaratnam then gave Kumar a warning: a man named Ali Far, who had worked at Galleon, was rumored to be wearing a wire. “I have to be really careful,” Rajaratnam said. “I can’t believe he’s doing that and betraying me.” He instructed Kumar to start using unregistered prepaid cell phones for their calls. When they returned to the condominium, Kumar opened his laptop, went into his Charles Schwab brokerage account, and bought three hundred shares of Starent, worth about eight thousand dollars. The deal was announced a week later. It was Rajaratnam’s last known inside trade.