The prosecutor finds a consolation prize

Cite this Article
Larry Ribstein, The prosecutor finds a consolation prize, Truth on the Market (March 07, 2011),


Mr. Bharara’s focus on insider trading has surprised many people on Wall Street. They had expected his office to instead bring criminal charges against top executives at the large banks that were at the center of the financial crisis.

The government’s gotten a lot of heat for not charging these executives, including at the Academy Awards. Bharara is well positioned to take a lot of that heat. He had to do something.

Rajaratnam must have seemed a tempting target.  He’s trading on non-public information.  The largely judge-made lines between legal and illegal trading are hazy and getting hazier, and Congress and the SEC have refused to define the illegality more precisely.  Surely if Bharara threw enough of his office’s prodigious resources at the problem he would come up with something.

Once Bharara decided to go after Rajaratnam, the hedge fund manager was all but doomed.  As Lattman points out, Bharara used “techniques traditionally used in pursuing organized crime,” including “173 secretly recorded telephone conversations.” He pursued the little guys and could threaten them with already draconian potential sentences. So “[n]ineteen traders in Mr. Rajaratnam’s orbit have already pleaded guilty to insider trading, several of whom are cooperating with the government and are expected to testify.”

Here’s one way of looking at this story.  Back in the glory days of Enron, Bharara might have been able to cook up something against one of the bankers. But a lot of those hard-to-prove cases flamed out and the prosecutors took some heat.  So a hedge fund manager finds himself being pursued as if he’s a mobster. 

While we’re condemning the actions of business criminals, we should save a little analysis for those who decide what conduct is criminal.