What Can Society Do To Protect Itself From Wily Predators Like Rajaratnam & Trump?

On the bright side, if Raj serves 20 years, he could lose some of that excess bulk, get into fighting trim and live longer

In yesterday's L.A. Times reporters Geraldine Baum, Tom Hamburger and Michael Mishak made it crystal clear to anyone harboring any delusions that born-to-wealth carnival barker Donald Trump is somehow worth something-- beyond entertainment-- to society, that the man has always been, basically, a parasite on the rest of us, figuring out how to game the system for himself at the expense of taxpayers. Their point is that this darling of brainless conservatives and supposed opponent of Big Government has relied on tax breaks and federal funding to build the real estate empire he inherited from his father; "a swashbuckling entrepreneur, shrewder and tougher than any politician, who would use his billionaire's skills to restore discipline to the federal government" is a misunderstanding of who and what Donald Trump is.

From his first high-profile project in New York City in the 1970s to his recent campaigns to reduce taxes on property he owns around the country, Trump has displayed a consistent pattern. He courted public officials, sought their backing for government tax breaks under extraordinarily beneficial terms and fought any resistance to deals he negotiated.

He has boasted of manipulating government agencies, misleading officials in one case into believing he had an exclusive agreement to develop a property and then retroactively changing the development's accounting practices to shrink his tax bill. In New York, Trump was the first developer to receive a public subsidy for commercial projects under programs initially reserved for improving slum neighborhoods. Such incentives have now become the norm in the powerful New York real estate community.

Karen Burstein, a former auditor general of New York City, reviewed a major Trump project in the 1980s and concluded he had "cheated" the city out of nearly $2.9 million. Decades later, Burstein said she was still appalled at the way Trump operated.

"It's extraordinary to me that we elevated someone to this position of public importance who has openly admitted that he has used government's incompetence as a wedge to increase his private fortune," she said in a recent interview.

It's beyond the purview of these 3 reporters, however, the report that this is how, without strict regulation and without fear of punishment, greed-obsessed sociopaths operate. Not just Trump, but many "respectable" billionaires who have bought political protection by owning the Republican Party and the Blue Dog faction within the Democratic Party outright. Not to mention the mass media.

So it was with great delight-- not to mention surprise bordering on disbelief-- to read yesterday that one of these plutocratic predators was actually convicted of a serious crime yesterday. Wall Street hedge fund operator Raj Rajaratnam will appeal and may get off in the end but right now, he is looking like he could actually wind up in prison, something that rarely happens to billionaires no matter how heinous their crimes. And Rajaratnam's wasn't about stealing a loaf of bread to feed his family.

Raj Rajaratnam, the billionaire investor who once ran one of the world’s largest hedge funds, was found guilty of fraud and conspiracy on Wednesday by a federal jury in Manhattan. He is the most prominent figure convicted in the government’s crackdown on insider trading on Wall Street.

Mr. Rajaratnam, who was convicted on all 14 counts, could face as much as 19 and a half years in prison under federal sentencing guidelines, prosecutors said on Wednesday.

Mr. Rajaratnam is expected to appeal.

The government built its case against Mr. Rajaratnam with powerful wiretap evidence. Over a nine-month stretch in 2008, federal agents secretly recorded Mr. Rajaratnam’s telephone conversations. They listened in as Mr. Rajaratnam brazenly-- and matter-of-factly-- swapped inside stock tips with corporate insiders and fellow traders.

“I heard yesterday from somebody who’s on the board of Goldman Sachs that they are going to lose $2 per share,” Mr. Rajaratnam said to one of his employees in advance of the bank’s earnings announcement.

“One thing we know, this is very confidential, someone is going to put in a term sheet for Spansion,” he told a colleague, referring to a proposed acquisition of a technology company.

“So yesterday they agreed on, at least they’ve shaken hands,” a tipster told Mr. Rajaratnam about an upcoming deal involving another publicly traded business. “So I think, uh, you can now just buy.”

For years, Mr. Rajaratnam was lionized as one of Wall Street’s savviest investors. At its peak, his Galleon Group hedge fund managed more than $7 billion in assets. Investment banks including Goldman Sachs and Morgan Stanley counted Galleon, which paid out roughly $300 million in trading commissions annually to brokerage firms, as one of their largest trading clients.

In the early morning hours of Oct. 16, 2009, federal agents arrested Mr. Rajaratnam at his Sutton Place apartment on Manhattan’s East Side. The government placed him at the center of a vast insider trading conspiracy, accusing him of using a corrupt network of tipsters to earn tens of millions of dollars in illegal trading profits in stocks including Google and Hilton Worldwide.

The case has led to insider trading charges against 25 defendants-- 21 of whom have pleaded guilty-- including former executives at I.B.M., Intel and Bear Stearns.
Mr. Rajaratnam fought the charges against him, insisting that he had done nothing wrong. His lead lawyer, John C. Dowd, said that his client’s success as a money manager came from “shoe-leather research, diligence and hard work.”

He based his defense on the so-called mosaic theory of investing. Galleon was famous for its dogged digging for information about publicly traded companies that would form a “mosaic”-- a complete picture of a company’s prospects that gave it an investment edge over other investors.

Mr. Rajaratnam’s lawyers argued that all of his supposed illegal trading was grounded in publicly available newspaper articles, analyst reports and company news releases. For instance, the defense presented evidence showing that before Advanced Micro Devices acquired ATI Technologies-- a deal that prosecutors said Mr. Rajaratnam had received an illegal tip about-- 51 news articles and 6 analyst reports speculated on the likelihood of a merger between the two companies.

Prosecutors dismantled Mr. Rajaratnam’s defense by acknowledging that Galleon performed legitimate research. But at the same time, they argued, the firm routinely violated securities laws. In the words of a former Galleon portfolio manager who testified during the trial, the firm did its homework-- but also cheated on the test.

“The defendant knew the rules, but he did not care,” said a prosecutor, Reed Brodsky, in his summation. “Cheating became part of his business model.”

Rajaratnam and Trump aren't the only sociopaths cheating society to make capitalism work for them. It's why we need a strong regulatory system. And it's why Big Business interests are investing so heavily in the Republican Party and the Blue Dog caucus to wreck the regulatory systems. Wall Street predators reacted badly to Rajaratnam's guilty verdict; the stock market tumbled. Crooks don't like being reminded what could-- even if it rarely does-- happen when they get caught braking the laws. Although Rajaratnam funded Bill Frist's shady Volunteer PAC to the tune of thousands of dollars, he also gave thousands to Democrats, paying the protection racket game that keeps these predators in business. I wonder if Bob Menendez and Chuck Schumer will return the contributions they received from Rajaratnam; I'm sure Frist won't.