Friday, October 30, 2009

Why hasn't the SEC looked at Goldman's tips to Raj at Galleon?

In 2001 JP Morgan said this about Galleon: "we should reduce our allocation" to Galleon and the "more negative news about Raj and his cohorts."

The JP Morgan note also said  "alleges that the principals of Galleon “liked to operate in the ‘grey areas’” of the markets. “If these allegations are true, there are some serious issues about business conduct,” the memo said."

So who would trade with Raj and Galleon? JPMorgan thought they were a fraud in 2001. None other than Goldman Sachs--who are always able to spot a fraud, unless they are participating in it!

Or if they were getting paid. And Galleon paid out $250 million for information!

Although bank policies often prohibit employees from divulging specific information about orders, executives who dealt with Galleon said it regularly received “colour” on market developments, frequently delivered in Wall Street slang. One example would be traders discussing a “page one seller” of shares – a reference to the first page of the Bloomberg list of top holders of listed companies.

One executive who dealt with Galleon said: “They wanted anything the public did not have. They got various pieces and put them together and that was their edge.” A former Goldman executive who provided services to funds including Galleon said: “They were tough and aggressive. They cared about short-term returns and cared a lot about the impact of their trading and the costs. They expected a lot of market information.”
But Goldman would never suspect anything wrong with Galleon. After all, they were the tippee! And Galleon paid Goldman hundreds of millions of dollars for those tips. So let's look at Galleon's returns:

Way higher, and way better and way more consistent than Madoff's fictitious returns. But Raj's were real. The difference?  Galleon had the blessing of Hank Paulson, and the "insight" of Goldman Sachs!

So if Madoff's consistency was evidence of fraud, why isn't Galleon's?

Probably because, it would then make Goldman Sachs  in on the fix!

Because Galleon was in Goldman Sachs huddle, front running other institutions buys and sells, and trading off information that Goldman had, that others didn't!

How's Raj going to do at trial? Ask Goldman.

He spent $250 million for "research" from Goldman and Morgan Stanley, yet the prosecutor's case rests on a two bit hack?

This was just another high frequency, dark pool, front run, paid for, trading program sponsored by Goldman Sachs.

And instead of an algorithm that stole, it was people at Goldman who betrayed the trust of those who traded at Goldman.

So why hasn't anyone looked at his relationship with Goldman?

And who was Fat Raj's dummy at Goldman? 

Last week, Anil Kumar, 51, and a partner at McKinsey & Co is the one accused of giving Raj Rajaratnam at Galleon information on McKinsey clients. He was a graduate of the Indian Institute of Technology and the Wharton School.

Rajat Gupta of India, and current independent director at Goldman Sachs, was McKinsey & Company's first managing director born outside of the US. 

According to the WSJ:

Mr. Kumar developed a close relationship with Rajat Gupta, an Indian-born McKinsey veteran whose eventual promotion to managing director of the firm's world-wide operations, the first non-Westerner to hold the post, raised the profile of Indians throughout the company.

Mr. Kumar helped Mr. Gupta launch the Indian School of Business in the southern city of Hyderabad in 1999. The school has tie-ups with international institutions like Northwestern University's Kellogg School of Management, and its governing board is stacked with a who's who of prominent Indian executives.

This week, Mr. Kumar told the Indian School of Business's executive board, of which Mr. Gupta is chairman, that he would take a leave of absence from his role as an adviser.

Apparently these two are as thick as thieves.

Just like Goldman and Galleon were.

I'm sure Goldman will be able to assure us, that Rajat Gupta, a Goldman director, would never of discussed anything improper with Mr. Kumar, who had a propensity to discuss secrets with Raj Rajaratman. I would never even make that assertion.

Even though  Goldman was paid hundreds of millions of dollars from Raj's Galleon fund.

 Where's Lucas Van Praag when you need him?

Now I compared Galleon's returns to Madoff's. What did the beneficiary of Madoff, to the tune of $7 billion, Jeffry Picower do, the minute he "found out" Madoff was a fraud?

He closed the Picower Foundation. Even though he could of easily kept it open. After all, didn't he make $7 billion, that we found out later? He must of wanted it closed!

What did Raj do immediately after he was accused by prosecutors? Isn't he closing the fund?

Why did Goldman think Madoff's returns were inconceivable, but Galleon's weren't?

And why did Raj pay Goldman so much damn money?

Ask Raj. Or ask Anil.

But don't ask Goldman. Or the SEC. They just hired a former Goldman cronie as their new COO before Raj got busted.

You'll just get "no comment."