“Echoing the 1987 movie Wall Street,” wiretaps and informants wearing hidden microphones were employed by federal investigators to ensnare billionaire hedge-fund manager Raj Rajaratnam, said Susan Pulliam in The Wall Street Journal. Rajaratnam, CEO of the Galleon Group of hedge funds, was arrested last week and charged with insider trading, along with two executives of another hedge fund, an IBM executive, an Intel executive, and a consultant with McKinsey & Co. They’re accused of illegally sharing inside information on some of corporate America’s biggest names, including Google, Intel, and Hilton Hotels. (All the accused say they’re innocent.) Prosecutors charge that Rajaratnam, 52, pressured high-ranking contacts at technology and health-care companies for information about upcoming earnings reports, merger announcements, and other data not available to ordinary investors. “Galleon is always looking for that little bit of extra edge,” said one of Rajaratnam’s former traders. “That’s what the firm is about.”
Clearly, this guy plays hardball, said Alex Berenson in The New York Times. Galleon employees who failed to deliver the edge Rajaratnam was seeking quickly found themselves out of a job. But that doesn’t necessarily mean that Rajaratnam was trafficking in illegal inside dope. In a business in which “the most precious commodity is information,” the line between “buying legitimate research, trading rumors and gossip, and illegally paying for market-moving information” is a thin one. Prosecutors will have their hands full proving that Rajaratnam knew that the information provided by his sources “was valuable and that he should not be trading on it.”
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Maybe, but so far we’ve heard only one side of the story, said The Wall Street Journal in an editorial. As prosecutors often do when unveiling a big case, U.S. Attorney Preet Bharara disclosed selected bits of damning evidence, including a recording of one of the accused saying that she’ll “be dead if this leaks.” But we’ve seen splashy insider-trading cases fizzle out before. In bringing these charges, the Justice Department seems to be pandering to the public’s anti–Wall Street mood. “When political calls for scalps are in the air,” the wisest course is to demand that the government “prove it in court.”
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Issue of the week: Yahoo’s ban on working from homefeature There’s a “painful irony” in Yahoo’s decision to make all its employees come to the office to work.
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Issue of the week: Another big airline merger
feature The merger of American Airlines and US Airways will be the fourth between major U.S. airlines in five years.
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Issue of the week: Feds’ fraud suit against S&P
feature The Justice Department charged S&P with defrauding investors by issuing mortgage security ratings it knew to be misleading.
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Issue of the week: Why investors are worried about Apple
feature Some investors worry that the company lacks the “passion and innovation that made it so extraordinary for so long.”
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Issue of the week: Does Google play fair?
feature The Federal Trade Commission cleared Google of accusations that it skews search results to its favor.
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Issue of the week: The Fed targets unemployment
feature By making public its desire to lower unemployment, the Fed hopes to inspire investors “to behave in ways that help bring that about.”
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Issue of the week: Is Apple coming home?
feature Apple's CEO said the company would spend $100 million next year to produce a Mac model in the U.S.
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Issue of the week: Gunning for a hedge fund mogul
feature The feds are finally closing in on legendary hedge fund boss Steven Cohen.