Wall Street is a perpetual battleground for the forces of fear versus greed. But every so often the greed gets out of hand.
That can make the Street a fertile ground for fraud. Some of the most notorious financial crimes of all time have ties to the corner of Wall and Broad, and their impact — on victims, law enforcement, and future would-be crooks — lasts to this day.
Let’s catch up with some of Wall Street’s most audacious fraudsters.
‘Bring it on, baby!’
Information is the coin of the realm in any financial market. A hot stock tip can be a ticket to riches, and some people are willing to break the law to get one.
As founder of the Galleon Group, hedge fund manager Raj Rajaratnam had an uncanny ability to beat the market in the area that he and his team of traders and analysts specialized in: technology stocks. Investors were so impressed that they poured enormous sums of money into Galleon, which peaked at $7 billion under management and made Rajaratnam a very wealthy man.
How did Rajaratnam get to be so plugged into the secrets of the tech world? As detailed in a 2012 episode of CNBC’s “American Greed,” he had a secret of his own: a network of corporate insiders who supplied him with material information about their companies before it got out to the public and the stock market. That is illegal under federal insider trading laws.
“I think he felt a sense of power, that he had access to information that no one else had. And that he was able to profit by it,” said former Assistant U.S. Attorney Joshua Klein, now a partner at Petrillo, Klein and Boxer in New York, in an interview with “American Greed.”
The big break in the case came when investigators managed to get a warrant to wiretap Rajaratnam’s phones — a tactic never before employed in an insider trading investigation. Rajaratnam’s defense team fought hard in court to suppress the recorded conversations, but they were unsuccessful.
When prosecutors played the recordings at Rajaratnam’s 2011 criminal trial, it lifted the veil on a corner of Wall Street not previously seen — or heard — by the general public. Rajaratnam could be heard fielding calls from company insiders and even a Goldman Sachs board member supplying him with market-moving information that the public would only learn about later.
In one of the more colorful conversations played in court, Rajaratnam and Danielle Chiesi, a portfolio manager at another firm who would later plead guilty to conspiracy with Rajaratnam, banter about their access to secret information at some of the era’s most important technology companies.</…….