Greed? Envy?

~ The Billionaire’s Apprentice: The Rise of The Indian-American Elite and The Fall of The Galleon Hedge Fund. By Anita Raghavan ~

The billionaire of the title is Raj Rajaratnam, the charismatic, Sri-Lanka-born hedge fund CEO whose success was built at least partly on a network of South Asian contacts who fed him insider information. A highly social man who moved easily in both American and Indian circles, Rajaratnam is the center of this story, the man to whom all threads connect.

The ‘apprentice’ is Rajat Gupta, who took the IIT-HarvardBusinessSchool-Consulting path to fame and fortune. He came to the US in 1971, a time when there were few Indians on Wall Street or in consulting, broke many barriers, became the 3-time managing director of the global consulting firm McKinsey before moving on to serve on the boards of major companies, inspiring a generation of other Indian-Americans who followed his path.

Anita Raghavan’s well-researched book follows these two and a host of supporting characters through the massive insider-trading scandal that destroyed the reputations of both men. The title is a little perplexing, since it’s hard to see in what way Gupta could be seen as an ‘apprentice’. The subtitle is also a bit of a stretch: ‘The Rise of the Indian-American Elite and the Fall of the Galleon Hedge Fund’. The book certainly covers the Fall of Galleon in great detail, but the ‘Indian-American elite’ in this book turns out to mean only the Indian-Americans who passed insider information on to Rajaratnam. Other Indian-American luminaries in business, politics, medicine, science or literature are barely mentioned (e.g. Victor Menezes, Indra Nooyi, Vikram Pandit, Vinod Khosla, Bobby Jindal, Nikki Haley, Atul Gawande, Jhumpa Lahiri, Kiran Desai, Sundar Pichai, Satya Nadella. . .), and the history of South Asians in the US is covered only perfunctorily. However, the book does an excellent job of tracing the main story.

Supporting parts are played by:

• Roomy Khan, one of Rajaratnam’s informants, who made big bucks during the internet boom, but then got herself into financial trouble with an overextended mortgage and large financial losses.
• Anil Kumar, also at McKinsey, who according to this book, hungered to break into the really big leagues, and was willing to cut corners.
• Danielle Chiesi, the Mata Hari of this story.
• and several people, mostly South Asians, in the tech industry.

And then there are the people on the other side: the government lawyers who carefully built up the case and brought it to trial. Although there were plenty of non-South Asians involved on this side of the story, the author has slanted the book towards those of South Asian origin so as to, presumably, underline the many South Asian connections in this affair. Thus, Preet Bharara, of the US District Attorney’s office, and Sanjay Wadhwa of the SEC feature prominently.

The evolving news of this scandal fascinated many people, including those like me who have very little knowledge of the financial industry. We all wondered why people like Gupta and Kumar would participate in such illegal activities. After all, they were famous, important, and hugely wealthy through their own hard work. Does every millionaire want to be a multi-millionaire, and does every multi-millionaire enviously hunger for billionaire status? Are they just, well, greedy?

Some opinion columns at the time of the trial pondered whether there was something specifically South Asian in this story. Are South Asians intrinsically corrupt, and do we tend to think the end justifies the means? Does the corruption in our home countries seep into our bones, so that we are all likely to behave unethically if we think we can get away with it?

This book answers these questions to some extent. The author is careful not to overreach and ascribe motives that she could not possibly know about, but the facts presented allow each reader to make up her own mind. The answer, it seems, is that there was no single motive driving all the characters. Rajaratnam appears to have been the most casually crooked, milking his social and business connections for the information that allowed him to make massively profitable trades. Roomy Khan’s longing to move from Silicon Valley to Wall Street was a weakness that Rajaratnam exploited for years, along with her financial woes. Anil Kumar is more complex and comes across as slightly insecure, ready to be played by the mastermind.

Which brings us to the most intriguing figure, Rajat Gupta, who was enormously successful by any standards well before he entered into any business deals with Rajaratnam. Gupta hobnobbed with heads of state, gave talks at Davos, owned a multi-million-dollar estate and other properties, and travelled around the world. He denied any wrongdoing, but the evidence so clearly presented in this book was enough to convince a jury (and this reader) otherwise. His motives were still not clear to me at the end, but there is at least one possible explanation suggested in the book.

I had naively imagined that at least some of this transfer of inside information was relatively inadvertent: friends meeting at dinner parties and letting spill bits of choice information after a few drinks, or people showing off their importance by dropping names and non-public gossip. Sadly, this was not the case. The participants were spread out across the country, they communicated specifically for this purpose via phone, text, and IM, and passed on information that was restricted and tightly controlled. The veiled phrases they used clearly indicate that they understood the importance of secrecy. There is an offshore account in the name of a housekeeper, and other money transfers of an obviously dubious nature. There are no innocents in this story.

Are South Asians more likely to be engaged in insider trading? Hardly. The rest of the South Asian elite appear to have remained on the straight and narrow, and the SEC list of insider trading cases looks pretty darn diverse.

Anyone with an interest in the South Asian diaspora, or finance, or the human motivation behind illegal activities, or political and social thrillers will be fascinated by this book. It is clearly and carefully written, impressively researched, and works well for both financial mavens and neophytes.

The Billionaire’s Apprentice: The Rise of the Indian-American Elite and the Fall of the Galleon Hedge Fund. By Anita Raghavan. Business Plus, 2013