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Thursday, 27 June 2013 01:45 - - {{hitsCtrl.values.hits}}
Q: So he knew what he was doing was wrong?
A: Yes.
Q: When we started this journey, you and I, we probably first read the book James Stewart wrote about Mike Milken. You would have thought that by now, people would know about insider trading. Yet, we are still sitting here boiling over these scandals. Why are they doing this?
A: I think people have short memories and another factor that comes into play is that at the time of the millennium, there would have been a regulation for this being put in by the SEC, and that meant that ordinary investors had access to this information just like big top traders such as Raj. The advantage was that Raj had to work harder and harder to get the edge as you say.
Q: That leads us to the other character of the book, Raj Gupta. Raj was in the establishment, he was the hedge fund guy. So as the trader guy he was McKinsey and Procter & Gamble. So what happened and what made him all of a sudden to do the wrong things?
A: When he stepped down from McKinsey in 2004, he felt this immense lack of power and he also looked at Raj Rajaratnam and thought that, for three decades I have been a sovereign man, I have been receiving a pay check and I have a 100 million dollars to my name and my friend Raj Rajaratnam has over a billion dollars to him name. I think it started getting to him.
Q: So he had that competitive instinct to keep up with Rajaratnam, and he then goes to do business with him, where they basically created a fund together.
A: It was Gupta’s vision to create a South Asian money management company. One thing lead to another and Gupta was spending more time in Raj’s office. Before you knew it, he was dialling into Goldman’s conference calls from Galleon offices and of course in September 2008, very famously, at Goldman’s board meeting where its directors learned about one of Warren Buffett’s investments in the company, he made a call to his top lieutenant and a minute later, this top lieutenant goes to the trading forum and says ‘buy Goldman Sachs’.
Q: So the next day, the stocks pop up since Warran Buffett is coming in. So what was it that Raj expected by bringing Gupta in? Gupta wanted to make a lot of money. It must have been like a pact with the devil.
A: I am not sure if it was articulated like that but certainly from Raj’s perspective, he was looking at Gupta as a man who had hung about Bill Gates and all the CEOs that you would want to know in the corporate in America. I think he thought that having Gupta in his camp meant that a little information would flow his way.
Q: These are first generation in America that has been successful. Talk about that community?
A: Raj was bit of an outsider with the community where he was actually a Sri Lankan and Gupta was an Indian. But I think that one of the reasons Gupta trusted Raj was because he thought Rajaratnam was part of the tribe. As you suggested, this has been a community that has been successful in a very short period of time. It has taken the Italians and the Germans several generations from digging ditches to state houses, but you have has Indian-Americans who did it in one generation. What I think is fascinating about this story is that on one hand, you have the dependence of the first generation of Indians and on the other, you have prosecutors who are essentially Indian. This is more a story of Indian-Americans than it is about the future of Indian-Americans. What is the next generation going to do and what is the path that they are going to take?
Q: So answer that question then? What do you see by doing all this work and examining the community in this country?
A: When I first came to this country, Indian-Americans were geeky, where they were the doctors, the professors and the engineers. I think the next generation will be members from all walks of American life. They will be lawyers, movie makers, writers. Sri Srinivasan gets confirmed for the appeal courts and one day, we will be seeing a possible Indian Supreme Court justice. So this is a positive story for the Indian-American community in the long run, but in the short term it may seem negative. The community is matured and is no longer confined to such professions in which they engaged in earlier and is a part of the mainstream American society. We will be here for a very long time.
Q: This Galleon is to the Indian, so you have to have a scandal?
A: The prosecutors wouldn’t have gone off with this collection of South Asians if we, as a community, didn’t matter.
Q: Who committed the greater crime? Was it Raj Rajaratnam or Raj Gupta?
A: I think it is Raj Rajaratnam since he spearheaded this and he didn’t only have Gupta, he had a whole network of people. Some South Asian and some not, like Adam Smith from Harvard, a very young guy who was so corrupt. He engaged in the same behaviour even after Raj Rajaratnam left Galleon. So I would say Raj Rajaratnam was the more morally corrupt.
Q: Raj Gupta was betraying great confidence, so there was huge ethical transgression.
A: I think what Gupta did is also pretty reprehensible since he was someone who was responsible for the board that he sat on and he has some judicial responsibility. He completely violated that.
Q: Can Gupta come back from this after his sentence?
A: I think he will come back in India. I have a friend in India who said that in America, all he read about Gupta was negative, but in India, he is a hero. He is someone who Indians feel was badly treated by the American justice system that is not fair.
