Trader, FBI Informant, Inmate: My Involvement In The Biggest Insider-Trading Investigation In U.S. H
In 2017, I want to introduce myself to the world, or rather, re-introduce myself. It’s hard enough trying to make one’s mark in the world, but it’s even more challenging trying to undo one’s stain.
My life is a tapestry of incredibly lucky breaks, a lot of hard work, many successes and some epic failures. My journey from India to the U.S. had its highlights of graduating from an Ivy League school and working in Silicon Valley, but the lows included serving a year in a federal prison. In May 2016, I appeared on CBS News 60 Minutes to discuss my most infamous moments. Even I look back and say, "Quite a story!"
I cooperated with the federal government for over six years in what would be the biggest insider trading investigation in U.S. history. In the past eight years, federal prosecutors have tallied over 90 convictions and collected almost 2 billion in fines related to the Galleon bust. Among others, Mr. Raj Rajaratnam, a billionaire, founder and chief of the multi-billion-dollar hedge fund, the Galleon Group, was convicted and sentenced to 11 years in prison. I was charged with wire fraud and insider trading and served one year in federal prison in Coleman, Florida.
The FBI came to me twice, first in 1999 and then in 2007. As I reflect upon my choices and give talks on the subject, a couple of questions have come up repeatedly. First, did Rajaratnam manipulate me? The answer is a resounding no! My actions were my volition, and I wanted access to the hedge-fund manager. We bartered information and research to benefit and improve our investment outcomes. Second question, why did I break the law twice? Well, probably, I was a bad actor who had to face the ultimate punishment, being incarcerated, to learn the lessons.
I was born in India to a middle-class family where education was paramount, and being a woman who wanted to excel in business went against the culture. My dad, a Ph.D., pushed me. He envisioned a different outcome for me and encouraged me to further my education in mathematics and physics.
In 1985, at 27 years of age, I landed in Silicon Valley with a Masters in physics from Kent State University and Masters in electrical engineering from Columbia University. It was an exciting place to be an engineer. My career began at IBM, where I worked in engineering and later, I worked in marketing and sales at National Semiconductor and Intel Corporation. Finally, I made it to Wall Street, an ultimate beacon of success. In 1998, I became a semiconductor stocks analyst at a billion-dollar hedge fund, Galleon Group, working for Rajaratnam.
I left Galleon in 1999 to manage money for myself. Six months after I left Galleon, the FBI knocked on my door. They said, “We’re after Raj Rajaratnam and want your help. I cooperated against Raj and met with the FBI agents a few times. However, the case against Raj went nowhere. I pled guilty to wire fraud, paid roughly a quarter million dollar in fine, and served one year of house arrest. Nevertheless, the case was sealed; no public scrutiny or disgrace accompanied my actions. Nobody knew, not even Raj. I was able to move on with my life and continue trading stocks to achieve success.
During my years working on Wall Street, I viewed trading on insider information as innocuous. There seemed to be no apparent victim, and I did not believe that I was stealing from anyone like a Ponzi scheme engineer does. The narrative for my coworkers and me was, the securities law is messed up. These misguided rationalizations became the bedrock of my decisions for my next ten years on Wall Street.
For most people, crossing an ethical or legal line is a decision made secretly and alone. However, gathering inside information was part of my training and blended with the expectations of my job. At least, that is what I continued to tell myself as I developed and cultivated friendships with executives at various levels within corporate America, to gather insider information or have an “edge.”
I made a lot of money; more money than I had ever imagined. My family considered me successful; my friends envied me, and there was nothing more I needed, except to sustain the feeling that my winning ways would continue. My coworkers enjoyed similar successes. We shared the sense of belonging, the drive to work hard, and our first tastes of power. The adrenaline rushes and high fives after each successful trade continued to feed our ambition and the resolve to “get it right” in the market.
I was living the high life: a fifteen million dollar house, throwing lavish parties, brandishing big diamonds, and collecting a small fleet of luxury cars. I happily remained in my social and professional network, communicating with my cohorts, who continued to break the law, including Rajaratnam - the most connected and influential of all.
In November 2007, the FBI returned. After a few questions, I realized I needed a lawyer. The gig was up. My cooperation kicked off a sequence of secret meetings with government officials in New York for two years. My life became like one of the disguises, secret meetings, and recorded phone calls.
I was taxed and conflicted by the pressure to roll over on my colleagues and friends for what we had done. Prosecutors were threatening me with decades in prison unless I fully cooperated. I felt guilty and toxic. In the end, I did not feel that I had much of choice, and I wanted to do the right thing. We were all breaking the law by obtaining confidential information from friends in Silicon Valley and Investment Banking. In two years, I made 1.5 million dollars in illegal trades; my friends and associates made over twenty-five million dollars off of these tips. It was easy money!
In October 2009, my husband read a story in Wall Street Journal about Raj’s arrest and all of his illegal trades. He also read about “Tipper A” - the government's informant. He turned to me and said, “You are Tipper A.” My covert cooperation with the government was splashed all over the media, and the life I had come to know was over.
Once I was identified as “Tipper A,” my life changed forever. The scale of the investigation and the people arrested was shocking to me. My quiet life turned into the media frenzy. Every photo of me captured me at my worst; I was described as overweight, harridan, and a narc. I could no longer look at the news. The markets that I once loved, now despised me.
I pleaded guilty--again. But this time Raj did not escape. My former friend and colleague went to trial, was convicted and sentenced to 11 years in prison.
My choices have inflicted insurmountable harm. I never thought I was cheating the average investor and rationalized that I was doing my job - gaining an edge and gathering information to validate the stock investments. In this frame of mind, I could not tell what was right from what was wrong. The FBI agent once said to me, “Disagreement with the law does not give you the right to break the law.” He was right. I couldn’t plead conscientious objection to the securities law to escape my fate. I went to prison for a year.
As I continue to reflect on my choices, I hope to help people avoid the pitfalls of similar bad decisions. I will write about some of those here. My hope is that my story and my reflections on current events related to white-collar crime, particularly insider trading, will help further the dialogue of compliance. As part of this journey, I have done talks at business schools, investment funds, and corporate compliance groups. I aim to show ambitious traders and corporate executives the real face of temptation and its harsh consequences. I hope that I am slowly becoming part of a solution rather than perpetuating a very real problem.