Indian-Americans Face Insider Trading Charges

Two prominent Indian-Americans, along with a Sri Lanka born billionaire, have been charged in what U.S. prosecutors say is the biggest insider-trading case in a generation. The scandal is now reverberating in South Asia, particularly the island nation of Sri Lanka.

It is estimated that billionaire Raj Rajaratnam, the founder of hedge fund Galleon Group under arrest in New York on charges of insider trading, has invested more than $150 million in Sri Lankan shares. Even rumors of his trades can send the market up or down. Born in Sri Lanka, he was educated at the prestigious Wharton business school in Pennsylvania and went to set up a hedge fund for boutique investment bank Needham. The hedge fund was spun off with Mr Rajaratnam at its head in 1997. Galleon was well known for its extensive research reports, according to the New York Times, and for having many senior technology executives as its investors.

In 2007, there was a minor scandal involving accusations of insider trading against Pakistani-American Atiq Raza, but it was settled out of court with the SEC when Mr. Raza agreed to pay $3 million fine. Under the terms of the agreement, Mr. Raza was also barred from serving as an officer or director of a public company for five years, and he was permanently enjoined from future violations of the federal securities laws.

The Wall Street Journal reports that fears about the future of Rajaratnam's and Galleon's investments in Sri Lanka caused a major selloff Monday. After losing about 3% during early trading, the Colombo Stock Exchange benchmark All-Share Price Index ended the day at 3082.91, down 1.6%. Shares in which Mr. Rajaratnam or Galleon hold major stakes were among the biggest losers.

Mr Rajaratnam is estimated to be worth about $1.3bn by Forbes magazine. Galleon, the hedge fund he founded, had managed up to $7bn in assets. He was investigated by the Federal Bureau of Investigation in 2007 for allegedly funding the Tamil Tiger rebel movement in Sri Lanka, the Central Bank of Sri Lanka said on Monday.

He was among several wealthy Sri Lankans who donated to the US-based charity, the Tamil Rehabilitation Organization, which may have been funneled to the Tamil Tigers.

In addition to Sri Lankan Raj Rajaratnam, 52, the accused include two Indian-Americans, Rajiv Goel, 51, of Los Altos, of Intel's treasury department, and Anil Kumar, 51, of Santa Clara, an executive at the global consulting group McKinsey & Co. Both were rising stars in the high-tech constellation of Silicon Valley. Locally established and internationally connected, the two men's work and reputations stretched to India and back, as they moved in the rarified air of global big business, according to a report in San Jose Mercury News. Kumar and Goel are both charter members of TIE, the Indus Entrepreneur, an organization of mostly Indian-Americans in Silicon Valley.

Goel and Kumar supplied information about their portfolio firms or clients to co-conspirators, according to the complaint, who in turn made profitable trades. Kumar was arrested in New York, then later released on a $5 million bond, while Goel appeared briefly before a federal judge in San Francisco Friday before reportedly posting a $300,000 cash bail and a $100,000 bond. Both of them have been put on leave by their respective firms. The investigation is likely to lead to insiders at several other firms beyond Intel, IBM and McKinsey.

In India, where Kumar had been heavily involved in the Indian School of Business, embarrased officials announced he had voluntarily taken an indefinite leave of absence from the board because of the scandal.

And like Kumar, Goel's Indian roots were deep. Before joining Intel, he worked in finance for one of India's largest business house, the Aditya Birla Group. With an MBA from the Wharton School, he also served as a corporate banker with Bank of America in San Francisco and managed a large portfolio of securities for Metropolitan Life out of New York, according to Mercury News.

The lead prosecutor Preetinder S. Bharara, the US Attorney for the Southern District of New York, also of Indian descent, said “This is not a garden-variety insider trading case." He alleged that the scheme made more than $20 million in illegal profits since 2006. According to the NY Times, Bharara, 40, was born in Ferozepur, India, and he was an infant when his parents immigrated to the United States in 1970. He grew up in Monmouth County, N.J., and graduated from Harvard in 1990 and Columbia Law School in 1993. A rising star in the Democratic Party, Bharara supervises over 200 lawyers who prosecute high-profile cases in New York City.

There have been other recent white collar crime cases against Indian-Americans. Earlier this month, an Indian-American lawyer in Los Angeles, Sandeep Baweja, 39, agreed to plead guilty to two felony charges relating to a scheme where he took more than $2 million awarded in a class action suit and lost it all on the stock market.

Last year, Vijay Taneja, an Indian-American investor and producer of Bollywood movies, was convicted of mortgage fraud in the United States.

This is, indeed, a sad day for many people of South Asian descent in the United States, particularly in Silicon Valley. Let's hope the accused receive a fair trial amidst the wave of negative publicity surrounding the case.


Related Links:

Haq's Musings

Atiq Raza Pays Fine, Settles Insider Trading Charges

US Mortgage Fraud Funds Bollywood

Insider Scandal Hurts Sri Lanka Stocks

Murder-Suicide in Silicon Valley

Bigotry Bedevils Silicon Valley Eatery

Pakistani-American: Mr. Thirty Percent of Silicon Valley

TiEcon and HDF Fundraiser in Silicon Valley

South Asians in Silicon Valley had a big weekend with both TiE(The Indus Entrepreneur)and HDF(Human Development Foundation)holding their annual events. These events brought out the powerful, rich and famous with origins in the sub-continent including former Pakistani Prime Minister Shaukat Aziz, Lord Nazir Ahmad and celebrity politician Tariq Aziz. While Mr. Shaukat Aziz was the keynote speaker on Thursday evening at the TIE Global charter member reception, the Human Development Foundation annual fundraiser was addressed by Lord Nazir Ahmad and Tariq Aziz, among others.

TiEcon 2008

Mr. Shaukat Aziz was warmly received by the The Indus Entrepreneur charter members as he spoke about the opportunities for American and South Asian entrepreneurs and investors in both India and Pakistan. "They can help lower the temperature and build trust, which is needed to resolve disputes," he said of TiE effect on the political animosity between India and Pakistan.



Beyond the TiE Global charter member event on Thursday night,the TiEcon 2008 conference continued through Friday and Saturday. There were some 4,000 attendees at the Santa Clara Convention Center, packing keynotes and parallel panel discussions on topics such as the Internet economy, life sciences, green technologies, what's hot - and not - in mobile phones to next-generation enterprise software programming.


HDF Silicon Valley Fundraiser 2008



The fundraiser was attended by over 500 Silicon Valley Pakistani-Americans and others at the Wyndham Hotel in San Jose, CA. It featured Lord Nazir Ahmed as the keynote speaker as well other speakers including Ethan Casey, author of a travelogue "Alive and Well in Pakistan" and Prof John Mock, a professor of Hindi and Urdu at University of California Santa Cruz. The event raised over $140,000 for building schools for the poor children in Pakistan. As usual, Mr. Javed Khan, Mr. Shahid Khan and Mr. Ather Siddiqui were at the forefront of this effort.



Lord Nazir, in his keynote, talked about the continuing difficulties faced by Pakistanis. He said that Pakistanis have lowered their expectations from "roti, kapra and makaan" to "roti, bijli and paani" and were still struggling for the lowered expectations. He was critical of Musharraf. Ethan Casey, however, said he has been going to Pakistan for over twelve years and he found all successive governments from Bhutto to Sharif to Musharraf all deeply flawed. Casey felt that Pakistanis are quite used to dealing with continuing crises and they will rise to the occasion and address their problems without relying on the governments. He particularly thought that the Pakistan expatriate community can help.

Though Lord Nazir Ahmed was a keynote speaker, he almost stole the show from comedian Azhar Usman with his jokes. For example, he said his mother does not understand what a British lord is. She thinks he has become a Tehsildar, a notch above the Numberdar, the highest government official in the village where he was born near Mirpur. What he said sounded a lot funnier in Punjabi. Then he had a sirdarji joke about a sikh who told him he was "Lord Ranjit Singh". When Lord Nazir expressed surprise about not having seen him in the British House of Lords, Ranjit Singh explained, "I was a landlord in Punjab. I left the land back home. So, in the UK, I am just a lord, not a landlord."

The speeches and fudraising were followed by stand-up comedy performances by Samson Koletkar (who claims to be "the world's only Indian Jewish comedian") and Azhar Usman (Allah Made Me Funny) who looks like Osama Bin Laden and jokes about it.

Samson is young and emerging desi star comedian who warmed up the audience before the better known Azhar Usman took the stage. Samson has pretty good material but his delivery was a bit lacking in its effect. He had a couple of very good jokes about his Jewish-Indian parents.

For example: "Most comedians say their dad is so cheap that.... When I hear that I say to them "You talk about cheap. My dad is an Indian Jew. Now beat that!"

Another one: " My Jewish mother in India wanted me to marry " a nice Jewish girl", a Jewish mother in New York wants her son to marry " a Jewish girl". But a Jewish mother in San Francisco just wants her son to marry "a girl".

Azhar's famous intro line that gets the audience laughing is " Hello, I am not Osama Bin Laden. I am his cousin Osama Bin Laughin". He had a lot good material about desi and Muslim humor in the US. For example: "You often hear Muslim men described as terrorists and Muslim women as oppressed. Have these people actually been inside a Muslim household to observe it? If they really do, they'll find the reverse to be true. Muslim men oppressed and terrorized by their women."

Another example: " Desis are the biggest bootleggers. They buy one copy of my CD and copy it for a hundred people and sell it. Once I asked my dad to buy me a Nike
pair of shoes costing a hundred dollars in Chicago. My dad's response: "Pagal ho kiya? Soo dollar ka joota pehno gai?" Then my dad took me on a trip to Patna market in Bihar where he found me a Nike pair that looks exactly like the one I saw in Chicago. But when you look closely at the logo, it says "Nice".



As the population of South Asians of various ethnicities, religions and opinions grows from tens of thousands to hundreds of thousands in this high-tech hub, it seems that Silicon Valley is becoming a center of South Asian culture and business in the West. This region can serve as the bridge between this great nation and the emerging economic and political powers in South Asia.