You Call This a Good Start

A Rich Guy Being Frog Marched in Handcuffs
It makes me feel good

It appears that US Attorney for New York has come up with a new way to enforce the laws against stock fraud, by going after them as if they were members of organized crime, with things like court ordered wiretaps, which were used to bring an indictment against Raj Rajaratnam, the head of the Galleon Group hedge fund.

The thing is, it is organized crime, it requires an enormous amount of...well...organization to pull off insider trading schemes:

Mintz said the alleged $20 million scheme is the most elaborate insider-trading ring discovered since the 1980s when the government began using criminal laws to prosecute such allegations.

“This was an extensive web of insider trading built upon years of contacts and strategically placed people,” the former prosecutor said. “Typically, insider trading cases are much more narrowly focused on some significant deal that’s leaked from one or two sources. The more people who have knowledge, the more potential that the scheme will be uncovered.”

There are dozens of people involved who have to know what is going on, and who must either actively aid, or actively ignore the activity for it to go forward when it is much more than an individual who has foreknowledge of a single event and then buys or sells based on this, as was the case, for example, with Martha Stewart.

One thing to be noted here is that this is about what would be considered pennies, it amounts to about $20 million for a man worth well over a billion dollars, and so, on a deep level, it makes little sense: Why risk decades in jail for something that might net less than 2% of your total net worth.

Here is what going on, I think. Rajaratnam, and Galleon made their money through insider trading, and simply, he continued to do so once he was a made man.

One hopes that as prosecutors dig into this, they get more people to roll over, and they expand their investigation.

RICO, the Racketeer Influenced and Corrupt Organizations Act, as well as an aggressive use of aggressive asset forfeiture laws would spread the net further and wider.

The days of a Michael Millikan doing his 22 months and leaving prison fabulously wealthy should be a thing of the past.