The Billionaire's Apprentice: The Rise of the Indian-American Elite and the Fall of the Galleon Hedge Fund by Anita Raghavan Read Free Book Online Page B

brother, Rengan was a bachelor who freely confessed to having a hard time meeting the right woman. “It definitely feels like there are less quality women out there,” he told FoxNews.com in 2001 for a feature the website was doing on the lack of young single women. Thirty-one years old at the time, Rengan said he was stressed about it. “It’s like they’ve all gone away or someone snatched them all.” Raj, the more successful of the pair, often helped out his kid brother, making introductions on his behalf for business and pleasure.
    For a change, on the Arris trade it looked like Rengan was giving his older brother Raj a hand. On July 26, hours before Arris reported its poor earnings, two Galleon funds managed by Todd Deutsch, a socially awkward Galleon portfolio manager who reminded colleagues of the movie character Rain Man because of his astonishing ability to name the exact stock price of a thousand different stocks, sold more than $1 million of Arris stock. In an email sent at 11:17 a.m. the next morning, Deutsch, the manager of the Galleon Captain’s Partners fund and the Captain’s Offshore fund, said to Rajaratnam, “Arris [thank you] for getting us out.” (Deutsch has not been charged with any wrongdoing.)
    Unusual as the Arris trades were, for Wadhwa, the case offered little promise. Moon, the UBS lawyer, suggested that Sedna was engaging in a pattern of cherry picking, where a manager who runs several funds allocates the best investments to a preferred fund, in this case keeping the winners for an investment pool where all the investors are friends and family members. Cherry picking works like this: shares in a trade are allocated to different funds after a fund manager determines if a trade is profitable or not. Ordinarily, shares are supposed to be allocated to funds at the time of purchase, when it is unclear if a trade is a winner or a loser. Cherry picking is a violation of US securities laws, but it is hardly a sexy, headline-grabbing crime like insider trading. Few regulators, if any, have made their name on cherry-picking cases. And the hedge fund involved, Sedna, was minuscule. Was pursuing a case against Sedna the best use of the SEC’s scarce resources?
    The meeting concluded and Wadhwa went back to his office to investigate.
    A quick search on Google revealed that Sedna was a speck on the hedge fund landscape, which by 2006 was a sprawling investment metropolis of more than sixty-five hundred hedge funds, mostly based in Greenwich and London, managing $1.1 trillion in assets. The only thing that distinguished Sedna from the hedge fund pack was that its founder, Rengan, was the younger brother of Raj Rajaratnam, the manager of the Galleon Group, a successful New York hedge fund managing some $5 billion in assets. As Wadhwa delved deeper, he found a trove of laudatory articles on Raj Rajaratnam that gushed about his stunning market-beating investment performance.
    Jaded by his experience with other cases, Wadhwa took a more jaundiced view of Galleon’s steady returns and the positive press surrounding Raj Rajaratnam. He wondered: was Rajaratnam truly a hedge fund savant as the articles portrayed, or was he simply a mere mortal with impressive connections?

Drama at IIT
    When Rajat Gupta arrived at IIT in 1966, he stood apart. Most of the boys in his class—and they were largely boys—were living away from home for the first time and found the small liberties of dormitory life intoxicating. Not Gupta, who at seventeen was mature beyond his age.
    “Our adolescent hormones and new-found freedom formed a dangerous mixture and we were all 17 going on 14,” says Harbinder Gill, who lived in the same dorm as Gupta. “We spent every waking moment on some insane prank or the other, which would today be considered sexist or even harassment. Except Rajat, who seemed to be 17 going on 30.” While classmates would spend their free moments “gallivanting on the Delhi University’s richly co-ed