Raj Rajaratnam is almost the perfect villain for an America still coming to terms with the impact of the global downturn and the financial crisis that sparked it.
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Last Updated: May 17, 2011
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The disgraced billionaire's fleshy face has, like that of con man financier Bernie Madoff, become an embodiment of the worst sort of Wall Street "fat cat". He was rich beyond imagining but his greed meant he still wanted more. As a hedge fund manager, he was deeply entwined in the sort of complex financial dealings many now distrust.
His arrogance, according to the jury that convicted him on 14 counts of securities fraud and conspiracy, meant he was willing to break laws that others obey, symbolising the idea that when it comes to high finance, the rich play by different rules in a rigged game.
Now that Rajaratnam has been found guilty of insider trading and seems set to spend a lengthy stretch behind bars, unless he wins his appeal, the US is mulling over what the verdict means.
At first glance there seems a lot of scope to justify the flood of column inches devoted to every twist and turn of the Rajaratnam case. Putting the former Galleon hedge fund manager on trial was certainly a victory for the department of justice and especially Preet Bhahara, the US attorney for Manhattan.
Over the past 18 months, Mr Bhahara's office has charged 47 people with insider trading, of whom 36 have pleaded guilty or been convicted.
That is quite a work rate.
Nor were Rajaratnam and Galleon small fry. In the past, Wall Street investigators have been accused of picking off symbolic cases, handing out sentences to a few junior executives but letting bigger fish swim away.
But Rajaratnam was one of Wall Street's top names, and he was seen as a canny investor by his peers.
At its height, Galleon managed US$7 billion (Dh25.7bn) of assets and was a huge client of some of the biggest investment banks in the world. For those who want a stronger watchdog on Wall Street, this is reassuring evidence the bankers and traders do not always get their own way.
There is more: the key development in the Rajaratnam case was the use of covert wiretaps by federal investigators. It was the first time that had happened in a securities case, rather than, say, a mobster investigation. But there is no sign it will be the last. Already this powerful new tool is being used in other cases.
Late last year, John Kinnucan, a financial analyst in Oregon, was asked by the FBI to record his phone calls with a hedge fund client. He declined and e-mailed his clients to tell them about the request. But how many others have agreed? Anyone thinking of repeating Rajaratnam's scheme should at least have a nagging fear of who might be listening in these days.
Certainly there have been reports of security firms being hired by hedge funds to sweep their offices for electronic bugs. The funds have upped their budgets to cover legal issues and increased their efforts to track down illegal trades.
But that is where the long-term implications of the Rajaratnam case end. The fact is insider trading in stocks and bonds is not a huge problem for the US economy. It played no meaningful part in causing the financial crash of 2008.
It is not a systemic risk to the wider economic workings of America. And the slew of cases nailing people for insider trading has been overshadowed by a complete lack of cases over the sort of things that did help cause the economic crisis.
Despite appalling practices in the way home loans were sold and the packaging of toxic mortgage-backed securities with top credit ratings, there has not been a single high-profile criminal prosecution at a major financial institution.
So far, it seems to many Americans, those on Wall Street who helped cause misery for millions have escaped the sort of scrutiny Rajaratnam got.
Of course, no one is saying it will be easy. Aside from pursuing insider traders, the intrepid Mr Bhahara recently filed a civil suit against Deutsche Bank accusing it of lying about mortgage quality on its books. Although he conceded he did not have enough evidence to justify a criminal case, his action was a step in the right direction.
There are other signs, too. Recently, Goldman Sachs shares took a sudden tumble.
It happened after media gadfly Matt Taibbi, the Rolling Stone journalist, wrote a hard-hitting piece saying the once blue-blood bank should face legal charges as a result of a Senate investigation into its business practices. Two stock analysts then downgraded the bank's stock, sparking a sell-off.
Legal worries now cloud Goldman's future in a way that seemed unthinkable even last year. Its once pristine reputation appears deeply tarnished.
Whether this will lead to criminal charges remains to be seen. But people on Wall Street are worrying about the possibility.
That, in the end, could be far more significant than putting Rajaratnam behind bars.
