Giggles, Girls and Gupta: The Raj Raj Tapes

Published: Mar 15, 2011

Topics: Consulting       

Compelling developments continue to surface this week from the federal courthouse in Manhattan, the setting for the most publicized insider trading trial in history. As the trial of brash hedge fund manager Raj Rajaratnam enters its second week, federal prosecutors have unleashed a barrage of evidence that the government hopes will prove conclusively that the defendant engaged in illegal information sharing for years.

Amongst the damning evidence presented to the jury were roughly a dozen recorded telephone conversations between Rajaratnam and his tipsters, obtained via secret government wiretaps. One recording captured the man called Raj Raj and one of his prize informants, former McKinsey partner Anil Kumar, in a water cooler exchange for the ages.

Raj Rajaratnam: Gordon Gekko or Gossip Girl?

First on the B-school buddies' agenda is business (or as the feds call it, insider trading). In the recording, Kumar is clearly heard relaying the details of an imminent $6 billion investment in Goldman Sachs by Berkshire Hathaway—information which, presumably, he gleaned from Rajat Gupta, the former McKinsey managing director who then sat on the board at Goldman. After Raj Raj eats his fill of privileged porridge, they direct their attention to their inside man at Goldman: none other than the ex-McKinsey high priest himself.

Kumar and Rajaratnam worry about Gupta cracking under the pressure. "What I worry the most about him," Kumar says, "is there could be this massive implosion in him, right?" "He didn't seem comfortable; he seemed like he was tormented," answers Rajaratnam; both have met with him recently (Raj Raj yearns for more personal contact: "I want to spend more time with him, but he's running around all over the world.") "Something hasn't gone properly," Kumar warns. "I don't think he did this out of choice."

Regardless of his motives (Raj Raj notes the prospect of "making $100 million over the next five, ten years without doing a lot of work"), Gupta is clearly a central figure in this unholy trinity of thieves.

After just five minutes of incriminating work banter, old pals Kumar and Rajaratnam discuss the finer points of their ascent to financial stardom.

Kumar giggles excitedly as the conversation shifts to juicier gossip; a typical who's sleeping with who quickly transitions into a hilariously lame discussion of women who are "spoiled by their dads" and women who "just need to realize that life is not perfect" and "get on with it." Maybe it wouldn't be so funny if Kumar weren't eating his own sarcastic advice as he awaits a lengthy stay in federal prison.

Bloomberg News: Anil Kumar, Raj Rajaratnam Wiretap Conversation

More wiretap revelations:

•The third McKinsey man is revealed. According to Rengan Rajaratnam (Raj Raj's tipster brother), David Palecek, a McKinsey partner who died last year of a staph infection, was "definitely thinking about playing ball." The late businessman's family strenuously denies any allegations, though Reng Raj begs to differ. "Buy as much as you can as soon as you can," Reng Raj said Palecek told him about the stock of Advanced Micro Devices, a secret McKinsey client.

•In another tape, Raj Raj explains to several of his cohorts how he covers his tracks by initiating decoy email chains. By setting in motion a series of email dialogues that present a façade of legitimacy to Galleon Group's underhanded dealings, Raj Raj hoped to throw off investigators sniffing around his business. It didn’t work.

•Rajat Gupta absolutely loves the Olympics. When Kumar went over to Gupta's house to hang out before dinner, Gupta "came home and just sat there for two hours. He just sat there and watched the Olympics." How rude.

For more information:
Dealbook: When Raj Rajaratnam Talks, People Listen
Financial Times