'Everybody Is A Scumbag!'
If you've been waiting for an 11,000-word story on the Galleon insider-trading case, and on the broader issue of finance-related criminal prosecutions/lack thereof, this week's New Yorker delivers.
The author, George Packer, tells the story of how Raj Rajaratnam paid a network of super-high-level informants to feed him inside information. Key sentence:
If there are examples of people whom Rajaratnam unsuccessfully tried to corrupt, they have not surfaced in the voluminous public record on Galleon.
The quote in the headline of this post — "Everybody is a scumbag!" — is essentially another way of saying the same thing. It comes from Rajaratnam's brother.
We also hear at length from Preet Bharara, the U.S. Attorney whose office brought the case. In particular, Bharara makes the case for why there haven't been more criminal cases brought against bankers and fund managers.
The hurdles to bringing criminal cases are high, he says. Prosecutors often have to show not only that someone broke the rules, but that there was criminal intent. And intent can be almost impossible to prove.
As an example, Bharara uses a hypothetical case of tax fraud.
So now we know, if we're omniscient, that a crime was committed, that the accountant was involved, that the taxpayer was involved. Maybe there's a lot of smoke—now comes the proof. This guy's going to testify, 'My accountant's a smart guy—I just relied on my accountant.' The accountant's going to say, 'I just relied on what he gave me,' and everyone has plausible deniability. That's a simple example of a way in which people can get away with even criminal activity when they're making false certifications to the government.