Friday, November 04, 2011

Money at all costs.... Consultants, hedge funds and insiders

Spartacus, Rocky, Cinderella, Obama every Amitabh Bachhan movie.... What do all of these have in common? The story of the underdog. For some reason, everyone likes a good underdog story. And that is perhaps why there is such a huge surge in the number of stories and articles on Rajat Gupta and Raj Rajaratnam of late!

Insider trading is not a new construct. Martha Stewart was perhaps the biggest name a few years ago and everyone knows that insider trading is not unknown in India. But when big names and billionaire hedge funds are involved, the scale of the events just hits gargantuan proportions. Media has a lot more to talk about, and the stories look a lot more psychedelic. Imagine saying ," richest Sri Lankan born American on the planet caught in insider trading". given the current mood of 'if jobless, occupy a city square', the whole 'down with greed' theme seems to get its perfect frontpage story. And unfortunately we Indians and our 'money at all costs a.k.a greed' attitude provide the perfect gasoline steeped firewood for this fire!

I happened to read a couple of articles on these gentlemen the other day. Each written in an attempt to project the humane side of each of these supposed Wall Street manipulators. So, I learnt that Rajaratnam belonged to the Sinhalese minority (LTTE, anyone?) and that he had been physically assaulted when he was studying in the UK. Furthermore he wasn't privy to the so-called Jewish clique when he was graduating from Wharton! His father had been an upright 'head ASPAC' of Singer Sewing Machines, the largest selling brand of sewing machines in the East! He got to study in UK, and made it to prestigious Wharton, where B school education is one of the most expensive in the world! Anyone heard of Richie Rich (Poor little rich man indeed!) and as for Mr. Gupta, he was an academically brilliant young man, and a professor at Harvard made a personal call to the CEO of McKinsey to make them recruit Rajat, and not turn him down for want of experience. Here was someone who advised large companies and told them how to conduct business, solve their problems and amassed enormous wealth in the process. But there always is a gap between the cup and the lip and no matter how wealthy one gets, someone else is always richer! And looking at the South Asian community success stories in the west, a pattern emerges. A pattern of flimsy ethics and a goal described by only money!

But the story throws up a ton of unanswerable questions. Like why does a hedge fund manager educated at Wharton need to pay a million dollars a year to a consultant to tell him what is and isn't insider information? Wouldn't anyone know that discussing outcomes of board meetings with directors is material nonpublic information? How could a Wharton educated billionaire hedge fund manager whose wiretaps are public domain information plead not guilty based on a soothsayer's prediction? (There is a story that says that an ola leaf soothsayer said that such calamities would befall Rajaratnam and that he would finally prevail). And then, consultants, are known to advise clients how to solve their problems by sometimes exploiting loopholes, all the while ensuring they followed the laws to the letter, not always in spirit. But can this tactic be a process one employs in one's own life? Can knowing how to twist the rules be a noble safeguard against penalty for breaking the rules? One then wonders whether it makes any sense for someone to sully one's reputation built over a 40 year period in a quest for more and more money! One of those articles had a ridiculous line that went on to say that one needn't denigrate Mr Gupta, because everyone has twisted the laws at some time or the other! But in all honesty, if he is guilty of what he did, his fault is bigger, as he betrayed the trust of all such big corporations and their shareholders all for personal gain and also provided a dead blow to the reputation of all Indians who have tried to make it big in the world!

But the worst plaguing question is one line I read in an article that said that all non Indians had entered into a plea bargain without a wiretap while all the Indians who were accused, plea bargained with a wiretap. In other words, just the Indians had no issues making money off of someone only to turn on him ones times soured! Money at all costs, use people and throw them away and have really flimsy ethics and scant regard for human relationships? That Indian success story is better best forgotten!  

No comments: