How Much Should Raj Get?
I find it ironic while a bunch of hipster ass hats take bong hits on the Brooklyn Bridge, Raj Rajaratnam is in a fight for his life. If you think this is hyperbole, please consider that prosecutors are seeking a term of 19-to-24.5 years for the 54-year-old convicted Galleon founder.
I find it pretty sad that insider trading, which was often ignored prior to Boesky, has come to carry the weight of a murder sentence. For those, interested in some history about insider trading here's a quick link. What I would like to hear about, is what the would be fund managers among us think about how much time Raj deserves. Personally, I think he's taking the fall for a lot more deserving scapegoats.
The initial estimate had Rajaratnam bilking investors out of $72 million, though it is increasingly looking like Raj only pulled in a tenth of that amount. If he were to face the maximum proposed penalty that would be the approximate equivalent of one year of jail time per $300,000 of illicit profits. Does that sound fair to you guys? What standards would you use?
With his case now having moved from the limelight Rajaratnam faces the unenviable position of waiting for the inevitable. Once you are convicted, all the leverage you may have once had, goes out the window. Wall Street is not a Law and Order episode and you can't simply turn snitch and roll-over on others who may have committed the same crime.
Simultaneously, without giving Raj a pass, I still haven't heard a sound argument as to why it makes sense to prosecute insider trading. Maybe there are few of you out there who would like to remind me. After all, with our hipster friends so doggedly intent on having their pound of flesh and eating it too, maybe someone should remind them that the 1% are not having the best of times, either.
how much jail time do you get for robbing a bank?
Are you certain the variables are the same?
^depends how you rob it. Bring a deadly weapon vs. not bringing a deadly weapon. Firing it vs. not firing it. Injuring someone along the way. Killing someone along the way.
Man you just touched a nerve Midas.
White collar crime potentially affects billions of people. It's sole reason for existence is greed.
Insider trading destroys confidence in markets. Market liquidity is dependent on the many being able to (not necessarily will) make money based on their own judgements.
When a tiny minority are capable of making money at no risk, the markets are no longer capable of serving the many, and the liquidity will evaporate for them, not necessarily a bad thing, would force people to use their money to create wealth with their money instead of chucking it at investments they know little about.
Don't get me wrong, I'd love insider trading to be legal, with so much access to that kind of information i'd make a killing from it, but it's wrong and is bad for the markets, which makes it bad for the world economy, which can fuck up billions of lives.
I hope this prick goes to jail for the rest of his days, it'll send a real clear message to anyone else out there insider trading, which in these times is deadly for the markets but tempting for the individuals.
+1
Also, in response to all of the comparison of this sentence to bank robbery, here's my perspective:
The purpose of giving jail sentences for crimes is at least partially to create a disincentive. Thus, an effective penalty has to take into account not just the relative legal implications of a crime, but the rest of the risk/reward profile in order to make sure the crime is unattractive to as many potential criminals as possible.
Insider trading, I think most would agree, has higher rewards and far lower risks than robbing a bank (less likely to get caught, certainly less likely to die in the process of getting caught, etc.). Thus, for the times someone actually does get caught, it makes sense to me to impose a stiffer sentence for trading on insider info.
Otherwise, we run the risk of a system where the expected value of insider trading is positive and whatever sentences are given out serve only a punitive purpose, which doesn't seem like an effective way to prevent anything.
I think he deserves to be prosecuted, but a term like that is unreasonable. If he was in Canada he would probably get around 5 years for that, but we wont get into a debate about Canada's legal system...
Even in the US, the time you get for robbing a bank is considerably less than they are giving this poor guy.
What he did is almost equivalent in theory to robbing a bank. Except, he was robbing a market. He robbed other investors of potentially more profitable trades/value. In a more vague sense, he robbed the market of liquidity/confidence.
I'd like to see a fat cat making millions get more time than some low-life robber trying to make a couple thousand dollars.
Why? Is it because you identify with low-life robbers?
glad it's not my job to put a number on it. I mean, like you said, it's hard to decide which standards to go by. 1 year per $x? That would be simple, wouldn't it.
The sentence being propsed is draconian, much like the sentences being meted out to crack dealers as opposed to coke dealers. Nonesensical!!
Any sentence over ten years clearly sends a message but over twenty is ridiculous. The sentencing regime in this country -- Sentencing Commission - has for years destroyed many families way after the sentence has already served its purpose.
Raj's biggest problem is that he doesn't look like Casey Anthony or Amanda Knox
Interesting that everyone is taking the social/punitive perspective on this.
@ trazer,
what do you think of what Altucher had to say about it.
This reminds me of something I read in the papers a while ago about a guy who was being convicted on the three strikes drugs laws: his lawyer said that if they guy had shot and killed the cop arresting him, he'd have done less time in prison.
Insider trading is ultimately bad for the system, no matter HOW people try to rationalize around it, but the penalties are too removed from the actual damage caused.
They're doing this to make an example out of him, all fine and well, but people who caused far more damage are walking around like nobody's business.....and I think THAT is a worse problem.
The justice system is very imperfect, and just like HR: if you can avoid dealing with them altogether, you're really better off.
The better question is why he stayed in the USA to get charged (same with Bernie). I would of been on a jet back home, flipping the USA and SEC off the whole way back. Yes yes, extradition, but with a hundreds of millions to spare I am sure he could buy some influence.
ah yes, the marc rich model.
I think the penalty for clear-cut insider trading should be at least on the level of any other large non-violent theft. Often you can be looking at 10-20 years. I think he should also be required to subsist on $50K/year for a few years out of prison or forfeit a lot of assets.
I'm not saying we should drop the hammer on him, but the rest of the country needs to see that thieves on wall street get punished the same as thieves on main street. Also, stealing millions needs to be punished more than stealing thousands.
Dude, you get charged with insider trading you flee the country. No ifs, ands or buts. GONE. You flee and have lawyers examine the case and if they tell you it is a slam dunk not guilty, you go and stand trial.
Why the hell didn't Bernie flee. He knew he was guilty. I'd have a jet, fully fueled, on standby 24/7 if I was him.
When in doubt, flee.
You are the worst kind of person.
Yeah, I am dude. I haven't committed any crime, I don't inside trade, I pay my taxes, I go to work.
You're worth hundreds of millions and you stand around and go to jail. Right or wrong, get on the plane. It's called common sense.
^^This - I have been saying this about this fatass since the charges were brought. He is from fucking Sri Lanka, get on the jet and go home dude
Some interesting comments by Altucher, ones that I dont disagree with the facts he portrays but in his reasoning from them, I do disagree.
Depending on what context you allow insider trading, directors of companies will be incentivised to create movements in share price and wil be able to trade off it. Short your own company then announce you're dropping your main business line (hi HP)? Boom. Payday.
Ok so you dont let the directors trade? Their mystery aunts get rich instead. You ban them from passing on information? Back to square 1.
Fraud being exposed earlier is a valid point, but can be found much more easily. I personally believe whistleblowing should be incentivised with immunity guarantees (much like with price colluding), for one party. This would apply to frauds and insider traders. If one party can grass in the other, and get paid for doing so, the amount of distrust in the criminal community should prevent it happening (by definition, it takes two to tango). This would also counteract his last point. Make the community self policing.
I disagree completely that this wont lead to a flight of liquidity. It will, at best, lead to a polarisation of investments, into a few key institutions which would monopolise the investment industry, leading to lower returns to the little guy.
It has to be illegal, because if it was legal, the consequences are not worth bearing.
For the record, Bernie didn't have hundreds of millions.
And for the record, ANT better hope this post doesn't come up if he's ever arraigned for white collar crime. :D
^^he'll have already fled so it wont matter :)
Yeah dude, the jet will be fuels. Me and Omar will be kicking it in some African nation.
They should free him once he drops below the 200lb mark.
I'm amazed that no one is talking about the legality of insider trading. If I didn't have a test in like 10 minutes I'd argue in favor of insider trading, but w/e. Proceed liberals to tell me how my friend telling me that GS is gonna report bad numbers destroyed faith in the market rather than making the drop less precipitous.
Insider trading is unfair and people don't like unfair. I think that is about the extent of it.
The extent of it (further to being unfair) is he had no chance with a jury. The guy is a billionaire being accused of stealing millilions from investors. In an age of making an example of the greedy, Raj had no fucking prayer with a jury composed of people that make $37k a year. I am not saying he should not do time, but let's be serious here. This guy is the prime example of the "fat cat banker" main street is calling out wall street on. No pun intended
this snufflupagus fucked a lot of people over in his practices with great magnitude.......i hope they punish him inside jail
Why the fuck would he bother with these pocket change insider trades? A couple million here and there when he's a billionaire? What a fucking moron.
I believe he made the lot off insiders, just the few cases they found are the ones he could prove. Proving you handed 10,000 cash to a random analyst in the street when you arent being watched is pretty damn hard.
I think Bernie didn't leave because he didn't want them to go after his family, wife, kids, whomever. If you look at the case thus far, he is the only one to really have taken the blame, so you can at least reason that he decided against fleeing because he needed to protect people in his family. It might not be the truth, but its a logical argument that could be made.
I don't know enough about the Raj case to comment on why he hasn't fled. Other conspirators in the case got pretty rough sentences; I think one guy got 10 years for being involved, and he had a wife and young kids.
I'll leave the arguments about why insider trading is ethically wrong, and hence illegal, to the academics.
The fact of the matter is, these guys know and understand the law, and they choose to break it. Drug dealers on the street face similarly high penalties for crimes that people don't think should necessarily be crimes. The fact is, if you live in this country, you need to obey our laws, and if you break those laws, you need to be willing to face the penalties.
The expected sentence is just. These crimes are difficult to detect, so the unlucky few who do get caught will pay the penalties for all who committ the crime and don't get caught. Remember, their is never juts one cockroach. These guys need to be made an exaple out of to scare other people who might engage in insider trading out of doing so. However, everyone knows the penalties going in, and so if they choose to engage in this behavior they need to accept the consequences.
It was hilarious watching speakers on CNN rip these protesters a new one.
My father coined the term "wallstock" hahahaha
On the dissuasive nature of punishment: so, will ruining one guy's life once every 20 years (last one was Milken) put off the thousands of hungry analysts who are desperate for results before they get booted out? I mean, that really worked for piracy. The ten old ladies convicted to gigantic fines cos their grandson downloaded Finding Nemo on their PC really put off the hundreds of thousands of college students who routinely download movies for free.
On insider trading: if you read any pre-1970s stock book, and especially Livermore's biography, you notice that the behavior of insiders is something all great traders watched with great interest (nowadays I guess this falls under "technical" analysis). The insider trades and their followers would actually smooth out jumps in share prices meaning the ignorant (and not very observant) shareholders could e.g. get out of their position in an acquired stock before the announcement without losing the entirety of the premium (merger arb guys have somewhat substituted for this but it's not quite the same as a steady, smooth move up). It was a win win situation.
It was made illegal in order to promote Rudy Giuliani's career. He needed some evil, as ever with a bubble people were angry at the rich because they weren't getting rich, the WASP elite in New York was getting fed up with these Jewish takeovers, and voila: perfect solution, bag Milken, destroy his network, hit the rich, get political cred, get elected. Transcripts of court cases for Milken & Co are sickening, the judge is so biased you feel you are in the Soviet Union.
The same will be true of Raj. The maximum sentence they can get away with without being accused of being (too) political.
@EURCHF:
You have mentioned this New York WASP-Jewish thing twice. First about how the Jewish connection forced the old WASPy elite boards of companies towards more efficiency and now about the WASP elite getting fed up with Jewish take overs. Add to that you are European.
I am genuinely curious about this whole story. Care to expand?
Covers it from both sides.
Gotta agree with ANT on this one- you better GTFO Nick Lesson style if such allegations are put forth.
For anyone interested in the actual recording between Raj and Anil (the McKinsey guy), here: http://upload.wikimedia.org/wikipedia/commons/6/6e/GalleonWiretap_RajaG…
If his jail time exceeds more than 10 years, that would be atrocious, unfair and a blatant message that he's being used as a scapegoat.
easy answer....go back to sri lanka...lol better than spending time in jail. live like a king in your own home country
The basic rationalizations for punishment are: incapacitation, rehabilitation, and deterrence.
In Raj's case there's no need to incapacitate him - he would not be able to go on and start another fund anyways. Rehabilitation is not needed either - he is forever banned from playing with other people's money, there's no need in teaching him how to do it more ethically. The specific deterrent - as in deterring specifically Raj from committing another crime is, again, redundant in this case. Therefore the only possible rationalization is a deterrent to others.
Our constitution guarantees the rights to life, liberty, and pursuit of happiness.
"Punitive" jail sentences - as in disproportionately strict for a crime, lest the others beware - go against the spirit of the constitution and everything this country is based on. Each person should be punished only for his/her crimes - making a spectacle of "execution" reeks of Dark Ages and the Great Inquisition.
There's no doubt that the proposed sentence is disproportionate. For comparison, an average sentence for child molestation is 11 years. The typical child molester molests an average of 117 youngsters, and 78% of them are back in prison within 2 years (http://www.yellodyno.com/html/child_molester_stats.html)
Are you to tell me that a theft of money by a rich man from other rich people deserves as much punishment as (often violent and repeated) molestations of 234 kids?
You're rationalization seems flawed. No need to jail b/c he can't do it again, can't deter b/c he can't do it again? It's not meant to deter AFTER the fact from ANOTHER crime, it's meant to deter you from committing the INITIAL crime. You're confusing incapacitation with deterrence. Incapacitation is mean to not allow you to commit the crime while incapacitated.
You're basically saying any professionally licensed practitioner has a get out of jail free card b/c they can't practice after losing a license. Sure Mr. Plastic surgeon, accidentally kill someone because you use cheap Vietnamese anesthetic, you will lose your med license so no need to go to jail to deter you from killing another because you can't be a doctor again.
Not only that, but just because he can't manage other's money, he can still commit insider trading by opening an account and making his own trades on others' info. Also he can get info, pass it to another who is managing money thus committing even more severe crimes than initially convicted.
Your punitive argument is likewise retarded. Sentencing GUIDELINES allow for a little subjectivity based on the circumstances of the case/individual, but all fall within the specific crime committed. You don't want to do 10-20 years, don't do the fucking crime. If they decide to give you 10 years, feel lucky...20 years, don't bitch.
Can you honestly think a person that might smack a waitress on the ass who is 17 and turns 18 next week deserves the same penalty as a man who puts his penis in an 8 year old girl? Get real, spreadsheets don't work in trials.
Also the 'punitive' you speak of does not exist in criminal court as I have shown you with guidelines/ranges for sentencing. Punitive DAMAGES exist in civil court, such as treble damages (triple the harm you caused) because if you steal 100k and have to give it back in civil court, there is no incentive to not try to get away with it other than the criminal aspect. As I'm sure everyone knows, the burden of proof for a civil trial is much less than criminal. Civil - preponderance of the evidence Criminal - Beyond a reasonable doubt. This is why your man OJ was successfully sued but not jailed.
For your last, referencing the average number molested and using that for a single conviction is not only irrelevant, but misleading. If someone was CONVICTED of 117 molestations, I'm sure they would get more than 11 year sentence, seeing as how 1 conviction gets you that. Also the avg 117 is a number grabbed out of fucking nowhere b/c no one knows how much they actually did, just like we don't have a clue how many times Raj atutally committed insider trading, you can only sentence what you are CONVICTED for.
No one looking to commit insider trading would want to do it in tandem with a tainted man. Even people 100% clean wouldn't want the hassle of being more closely watched than usual, because of who they are associated with. Learning to shut the fuck up instead of continuing to make retarded statements on the subject you don't understand would greatly improve your image and quality of life. if he feels comfortable enough to grab ass in a broad day light in a family restaurant, he most likely have put his penis into an 8 year old already. Sex offenders are not an isolated act, they are a pattern of compulsive behavior. 1. There's a reason "punitive" was in quotation marks. Have you had a chance to study what quotation marks usually denote? 2. You have mentioned guidelines and ranges, but haven't actually shown anything OJ is not my man, whatever you meant by that There was a link to the source of the figures. Did you attempt to read it and just didn't understand, or did you not realize the purpose of me citing a link right after mentioning data?
The one thing you are missing here is the signalling. If Rajaratnam gets punished like everyone else, folks will have a little more faith in the SEC and the stock market. That's good for the honest folks on Wall Street.
So I'm not for dropping the hammer on him, but I am 100% for sending a signal that if you steal a million bucks, you get the same punishment as if you clear out the cash register at the local 7-11.
With you on this, but in robbing a convenience store (presuming you have a weapon) you are putting unwitting lives at risk. When getting robbed by a hedge fund manager you are either a sophisticated investor knowingly getting into the lion's den or a dumb motherfucker with cash to burn.
I hate to use the Wall Street=Vegas analogy, but we don't punish a casino the same way we would a three-card monte dealer on the corner somewhere.
Again, not sorry for the guy, just not sure this really sends the right message once we dig beneath the surface a bit.
Robbery IS violent theft. Perhaps you meant burglary and/or larceny? Average sentence for burglary in a federal court is under 2.5 years, 3.5 years for felony burglary (burglary of habitaation and protected businesses, such as banks), and again 2.5 years for larceny and theft.
Argo, coudln't agree more! Great post!
Fat ass should do 100 push-ups, the number of push-ups he cant do = no. of years in jail
Does it? That's money that could have funded medical treatments, etc. etc. Every $100K that gets spent on highway safety here in the US can be used to save someone's life. The fact that the attribution is a little tougher doesn't mean the crime has done less damage.
I believe in treating folks with mercy in a lot of cases, but the bottom line is that Rajaratnam needs to be treated at the very least as if he robbed a convenience store without a deadly weapon. Life may be unfair, but being rich shouldn't mean you get better ways to steal stuff that carry lower prison sentences. Middle America, rightly or wrongly, sees the same intent and same damage as the kid who shoves the cashier out of the way and empties the cash drawer at the local gas station.
Did Raj really rob Middle America, though? I get the need for sending a message and hell I would probably pig roast his lard ass and feed the poor/destitute with it with a side of mango chutney, but that (IMHO) is not the issue. Raj isn't the guy who "hurt Main Street", he more likely hurt "Wall Street". The displacement of punishment is the issue worrying me, not the punitive veracity.
I would argue that his crime was against the Mass Market Affluent class of investors. The wealth split in America is 1/3 top 1%, 1/3 2-10%, 1/3 bottom 90%, but the top 1% doesn't have as much exposure to stocks as they do to private companies. I would argue that Rajaratnam stole largely from the top 2-20% crowd with 401ks, mutual funds, and investment banks in their brokerage accounts.
Rajaratnam's victims probably weren't Wall Street insiders either for that matter. They were people who thought they could pick stock up at a deal or get out at a premium without knowing the earnings numbers or upgrades/downgrades.
Don't let the middle-market investor see him as getting treated any better than a bank teller who tries to sneak out with a sack full of $100 bills or a guy who robs a convenience store without a deadly weapon. The man had millions in fraudulent gains; surely he should do at least the same time as someone else who steals less (to be fair, it has to be without the aid of a gun or knife). And that's probably 10 years, maybe 20.
He should get 0 years!!! Insider trading is nothing more than thought crime. Criminal convictions should only result in incarceration if there is a discrete victim. Can anyone say they were the victim of Raj's trades?
Professor last semester was classmates at Wharton with dude and after she told us that I kept on telling her she could have been that one lady who would seduce CEOs to get info for Raj. She wasn't very happy with that.
I don't see what's wrong with the sentence.
1) People are more likely to commit insider trading than rob a bank or kill someone. Therefore I can see the logic of it carrying a high sentence because insider trading needs a larger deterrent.
2) Insider trading is illegal (and SHOULD NOT be legal). The markets only work because insider trading is illegal. If insider trading were allowed, then no one would actually use the markets since a select few individuals would have all the market knowledge and everyone else would lose money in the markets.
3) Raj I believe was also convicted of perjury (or something similar). He had a chance to come clean, but he lied and he knew if he got caught, he would be punished even more. He knew the risks, and now he has to pay the price.
4) I don't know how long he's been insider trading, but I have a feeling people who get caught insider trading have done it more than once. This could mean he's been cheating and lying for years. There's a big difference between 1 illegal trade and multiple illegal trades over a decade.
This is crucial. The last thing we need right now is for companies' cost of capital to go up because people are losing trust in equity markets since they don't believe they're getting a fair deal.
Altucher's argument that insider trading would 'smooth out' the price moves is dead wrong. These swings are going to happen no matter what, and arguing that free markets don't work is a shitty justification for ripping the next guy off. I guess it's true: the guys at the top DON'T WANT FREE MARKETS because they will have to compete.
Here's how the real world works: People who are already successful don't want competition, they want to choke out threats. When Americans stop sucking up to this drivel, the markets will be better off, and we'll see less of the OWS type nuts around. Speaking of which, I think I'm going to punch a few of them on my lunch break today.
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