All language subtitles for American Greed s06e06 Galleon Group The Insider - Raj Rajaratnam

of American greed.

It's one of the biggest cases of insider
trading in history, and it's all caught

on tape.

I think this stock could go to $10, you
know, but we've got to keep this radio

silent.

Raj Rajaratnam had it all.

A wildly successful hedge fund, billions
in the bank, and the respect of Wall

Street. Raj was a competitor first. He
wanted to win, he wanted to win every

day. But behind closed doors, Roger
Rottenham was gaming the system to the

of $75 million.

He thought trading became his business
model.

And each time Roger Rottenham's phone is
ringing, the feds are listening.

And ultimately, it's his own voice that
will seal his fate.

It's kind of like taking a bite out of
the forbidden fruit.

Except for here, he was feasting on the
forbidden fruit.

In January of 2008, Raj Rajaratnam is
the head of a $7 billion hedge fund

Galleon Group.

His fund is generating stellar returns
for investors.

And Rajaratnam's phone is ringing off
the hook.

Many of the calls are from corporate
insiders providing a gold mine of market

-moving information.

On July 24th, just after 9 p .m., Raja
Ratnam takes a call from Danielle

Chiesi. The former beauty queen is now a
hedge fund trader and one of Raja

Ratnam's best sources.

I just got a call from my guy. I played
him like a fine -tuned piano.

Chiesi has the inside track on Akamai, a
company that manages Internet traffic.

She says the company will miss earnings.

It's news that won't go public for six
days.

Raja Ratnam shorts the stock.

In doing so, he will profit if the stock
price falls.

When earnings are announced on July
30th, the stock tumbles 25%, and Raja

clears more than $5 million.

But downtown at the FBI, agents are
listening in to his every word, building

case into the biggest insider trading
ring in history.

The story of Raj Rajaratnam begins an
ocean away in the South Asian country of

Sri Lanka.

When Raj was growing up there, there was
the civil war going on, and he grew up

in relative prosperity.

As a teen, Rajaratnam leaves his home
country to begin schooling.

in the Western world.

He studies engineering in England and
then earns a master's degree at the

prestigious Wharton School of Business.

Rajaratnam sets his sights on Wall
Street.

He heads to New York City and lands a
job at Needham & Company.

Wall Street Journal reporter Justin
Sheck says Raj distinguished himself as

stock analyst covering the computer chip
industry.

He was a great analyst, by all accounts.

Raj had a knack for explaining how
technologies worked and for telling

why they should invest.

And he was the person who knew the most
about the chip industry.

Rajaratnam proved to be a master
networker.

He forges tight relationships and
presses his sources for information.

Well, Raj got people to talk. He made
executives feel comfortable and feel

willing to confide in him.

His sources became a long list.

of Indian -born executives working at
Silicon Valley firms.

Rajaratnam works his way up the ranks at
Needham.

He is appointed head of research and
then, in 1991, president.

Raj was a very tough boss.

Some people used the word browbeat. He
would make the people working for him

work as hard as he did to get inside
companies and to really get exclusive

information.

The length Roger Rotnam will go to to
dig up information is a lesson quickly

learned by Gerald Fleming, an analyst at
Needham.

He had a Rolodex on his desk with
probably more context than anybody I've

known.

In May of 1991, there's a telling
moment.

Fleming makes an earnings projection for
Applied Material, a company that

manufactures semiconductor machines.

At the morning meeting, I talked
about...

my expectations.

I felt that Applied's earnings would be
somewhere around 41 cents a share.

Raj went into his office, closed the
door, made a phone call, and came out

said, no, you're off by a penny.

And Raj says, I have it from a very good
source that Applied will report 42

cents a share this afternoon.

Hours later, the announcement is made,
and Fleming is stunned.

Rajaratnam had the exact number, 42
cents per share.

before anyone else.

After experiencing a couple of these
episodes where Raj had clearly gotten

inside information, I started to become
more and more wary about what was going

on.

After ten months on the job, Fleming has
had enough and quits.

Rajaratnam may be alienating some with
his hardball tactics, but his reach and

power continue to expand.

In 1992, he starts a hedge fund at
Needham.

Two years later, he is taking home a
million dollars a year.

Still, Rajaratnam wants more.

In November of 1996, he sets up shop in
a small office on 57th Street and

launches his own hedge fund. He names it
Galleon Group.

Raj named his new hedge fund Galleon
after Spanish ships that would travel

world carrying great wealth in the form
of spices and gold and all sorts of

riches. And it was sort of a big name to
convey wealth.

With investors anxious to ride the
technology boom, funding comes easily.

It was a real go -go, heavy trading,
fast trading, and very profitable hedge

fund from the...

the heyday of the hedge funds.

After just one year, Rajaratnam has $800
million under management, and Galleon

is flying high.

At his new firm, Rajaratnam fosters a
high -stakes environment.

It's an intensely competitive
environment, and if you don't produce,

fired.

Rajaratnam leads by example and
continues pressing his sources and

up exclusive information.

But those tactics are continuing to
raise some red flags.

There were some executives in the Valley
who felt like Raj was too aggressive.

Over at Intel Corporation, executives
are having closed -door meetings about

Rajaratnam. And his research on Intel
that he would publish was

accurate for a number of years, and
accurate to the point where top Intel

executives became concerned that Raj was
getting information leaked to him.

Intel executives decide to take action.

They set up hidden cameras around the
office and wait.

On March 6th, they capture video of a
product marketing engineer named Rumi

faxing confidential information.

They caught an employee sending faxes to
Raj of very detailed numbers about chip

orders from big computer makers and
other details that Raj could use to

calculate approximately what the
company's... earnings would be, and it's

valuable information.

Intel reports Kahn to authorities, who
launch an investigation.

She actually went to work for Galleon,
spent about a year there, but in 2001

ended up pleading guilty.

Kahn serves six months of house arrest,
but Rajaratnam slips by.

Investigators can't prove that he ever
traded on the inside information, and

case is sealed.

Coming up on American Greed, Roger
Rodman lands a new source and makes $23

million off a single tip.

He wanted to win. He was intensely
competitive.

And how he won mattered less than
winning.

In 2003, Sri Lankan -born Raj Rajaratnam
is a self -made multimillionaire.

His fund, Galleon Group, is growing
rapidly and generating impressive

for investors.

But Rajaratnam's success is not built on
his trading expertise alone.

It is built on his Rolodex and a vast
network of insiders who are funneling

information.

For him, it wasn't just about getting
rich. It was about winning. It was

about... knowing more than the other guy
and making more on a company than the

next fund.

In 2006, Raja Ratnam sets his sights on
a new source, Anil

Kumar, an old classmate from business
school who now works at the prestigious

consulting firm McKenzie & Company.

Kumar and McKenzie wanted Galleon to
hire them as consultants.

Rajaratnam and Kumar met in the fall of
2003 at a charity event in New York. And

on the way out, Kumar basically said,
what's going on, Raj? We've been trying

set up this business arrangement, and we
don't even hear back from you.

And Rajaratnam replied, I don't want
McKinsey's help. I want your help.

Rajaratnam asks Kumar to serve as his
personal consultant and offers him half

million dollars a year for his
expertise.

McKenzie forbids outside consulting, but
Rajaratnam persists.

He said to Kumar, you work very, very
hard.

Other people make a lot more money than
you. You travel all the time, and you

deserve better.

So Raj shrewdly reeled him in by
appealing to his sense of being

underappreciated.

To evade detection, Rajaratnam proposes
an elaborate cover -up.

using offshore accounts and shell
companies to conceal the payments.

Soon, Kumar is funneling Rajaratnam
secrets from his corporate clients.

In 2006, he is consulting for a
microprocessor maker called Advanced

Devices, or AMD.

The company is in a top -secret bid to
acquire ATI, a graphics chip company.

and no one on Wall Street knew that this
was happening, or when there were

rumors floated, everyone thought it was
crazy, didn't make sense, couldn't

happen.

Roger Rottenham knew it was going to
happen, and he knew because Kumar knew

had told him, and Kumar knew because he
was in on all the strategy meetings.

Roger Rottenham buys ATI stock ahead of
the acquisition and then sits back and

waits. For an investor, information on a
company is power.

The more you know about a company and
the sooner you know it, the better

equipped you are to beat the rest of the
market.

When the deal goes public, ATI stock
shoots up 25 % and Roger Rodman clears

$23 million.

For Roger Rodman, it's his best year to
date.

He takes home more than $300 million.

Roger Rodman appears to be living the
American dream.

He lives with his wife and three kids in
a $17 million duplex on Manhattan's

east side.

He owns a $5 million estate in exclusive
Greenwich, Connecticut, and a vacation

home in Miami at the luxurious Setai
Resort.

Raj had nice homes and rided very well
for himself and his family, but he also

spent a lot of money in charity. He was
someone who was seen as very generous.

In 2007, Galleon Group's growth is
explosive.

Rajaratnam has $7 billion under
management and expands into new offices

Madison Avenue.

He now has more than 100 employees
working for him, including Tim Perotti,

who manages a consumer goods fund.

Raj worked very hard. He got to the
office, I would say, at 7 .30 every day.

think he rarely left before 7 .30, 8 o
'clock.

Raj wanted to win every day, and he
wanted guys around him who were very

competitive and wanted to win.

Each day at Galleon begins with the
morning meeting, an event feared and

by many employees.

It was 8 .35 sharp. Raj would be at the
head of the...

massive conference room table, and you
didn't know who was going to get called

on, and you just had to be prepared.

What are your best bets? What's your
trading strategy based on what?

And Raj had a way of finding out what
you didn't know. He wanted people to

that if you come to the morning meeting
unprepared, you're going to pay for it.

The culture at Galleon is one of testing
professional limits, but Rajaratnam

seems to revel in testing personal
limits too.

He liked to play pranks on workers.

Executives from Taser, which makes stun
guns, came to Galleon to explain to

Galleon why they should invest in Taser.

They said, our equipment is very safe.

We can tase someone here.

So he said, who wants to get tased? I'll
give you $5 ,000.

A woman on the trading desk took him up
on it, and so they tased her.

She fell to the ground, and Raj gave her
$5 ,000.

And on April Fool's Day, Roger Rodham
hires a dwarf to make a presentation to

his staff.

And Rod said, you know, this person is a
new analyst for small cap companies.

A small cap company is a company with a
small market capitalization.

It was an April Fool's joke, and he just
wanted to, you know, make everyone

laugh.

Roger Rodham is playing by his own rules
and seems unstoppable.

But when American Greed returns...

One of Rajaratnam's trusted informants
turns on him, and the feds pick up the

case.

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In 2007, Raj Rajaratnam is running one
of the world's largest and most powerful

hedge funds.

Rajaratnam has cemented his reputation
as a superstar on Wall Street and is

relishing his success.

He threw a lot of really good parties.

In June, he charters a yacht for a
raucous 50th birthday party cruising

the Manhattan skyline.

And in September...

He hires country legend Kenny Rogers to
play a private concert.

So Rogers had this big cowboy -themed
clambake at his home in Greenwich.

And, you know, Kenny Rogers was a
favorite of Rogers because of his song,

know, The Gambler.

No one to hold him, no one to fold him.
And it was a song that Rogers really,

really loved.

Kenny came with two tractor trailers of
equipment. He played for an hour. He

played The Gambler twice.

On the surface, Roger Rottenham seems
untouchable. But behind the scenes, his

world is beginning to unravel.

For the past seven months, agents at the
SEC have been investigating Roger

Rottenham on suspicions of insider
trading after an anonymous tip led them

Galleon.

In February of 2007, SEC agents subpoena
Galleon's electronic records.

With more than 10 ,000 documents to
review, the search is like looking for a

needle in a haystack.

The SEC began sifting through massive
numbers of instant messages. And for

six months, they began to see more
patterns of insider trading.

But Raja Ratnam thinks he is protected.

He has been diligent about covering his
trail.

Raja Ratnam basically told his...

core of trusted collaborators on the
inside trading that they should get off

instant messaging. They should do it on
the phone because the IMs were going to

be clocked by the SEC.

After months of meticulous research, an
investigator turns up a string of

suspicious instant messages from someone
with a screen name of Rumi 81.

Roger Rodman is subpoenaed.

and brought in for seven hours of
questioning.

And all of this kind of had the air of
routineness.

Registered investment advisor, SEC wants
to look at some of their records, wants

to talk to the manager. These things
happen a lot.

So Raja Ratnam seemed to be kind of in a
mood of, I can game this thing.

And he went in and told a lot of lies.

When investigators ask about Rumi 81,
Raja Ratnam provides a name.

She turned out to be Rumi Khan, the
woman who pled guilty to inside trading

decade earlier and had gone on
probation.

She was back in the game.

Days later, investigators find their
smoking gun.

The FCC, Florida Sound and IM, had Rumi
Khan saying to Raj, do not buy

Polycom till I get guidance.

Polycom is a video conferencing.

and guidance means the direction that
their earnings are going to go up or

It seemed like very specific inside
information.

It was like the one moment when
Rajaratnam could not get his source to

vague on IM.

That should have been said over the
phone, but she was trying to get it to

quickly, and she said it on IM.

They discovered calls to a Polycom
employee, Kahn's apparent source.

So they began to build up this
circumstantial case of phone records

they were talking, trading records
showing that they were trading the same

stocks and making a lot of money on
them.

It's a huge break, but investigators
believe the case is still too

circumstantial. What they need is one of
Raja Ratnam's informants to flip.

They had Rumi Kahn.

She was going to be a good target
because she had the prior conviction.

She was vulnerable.

She actually was having financial
trouble.

And they had the IM.

But still, they didn't know. And once
they tried to flip her, if it failed,

she told Raja Ratnam, that might be the
end of the case. So this was all very

dicey, you know, nail -biting, white
-knuckle stuff.

On November 28, 2007, FBI agents
approached Rumi Khan at her home in

California. Rumi Khan lived in great
splendor. Her house had six and a half

bathrooms, tennis court, swimming pool.

She allowed them in, and she lied and
lied and lied some more. And then

they brought out the IMs, including the
do not buy Polycom until I get guidance.

At which point, she retreated to one of
the six -and -a -half bathrooms and had

a cry and came back out and said, I know
if I don't cooperate, I'm going to go

to jail.

Khan agrees to flip and becomes an FBI
informant.

Now, with tape rolling, she calls
Rajaratnam and tries to bait him.

I think he sensed that she was a
weakling.

He was always trying to get her off the
phone.

And she was trying to get him to stay on
the phone long enough to say something

a little bit incriminating. And on a
couple of occasions in January 08, he

Investigators have what they need to win
a judge's approval to tap Raja Ratnam's

phone. It's an aggressive tactic rarely
seen in white -collar cases.

When American Greed returns, Raja Ratnam
is caught on tape.

You think we should start buying it now?

Yeah. I mean, I think this stock could
go to $10, you know.

But we've got to keep this radio silent.

Oh, please.

That is my pleasure.

In March of 2008, Raj Rajaratnam is the
target of a covert federal

investigation.

Agents suspect the hedge fund titan is
the mastermind of a large insider

ring and are moving aggressively in
their pursuit.

Josh Klein is an assistant U .S.
attorney working the case.

So this began to look like a conspiracy
or a series of conspiracies that

straddled Wall Street and Silicon
Valley.

On March 10th, the wiretap goes live on
Rajaratnam's cell phone.

And for the first time, agents are taken
inside Rajaratnam's world.

Hi, Dave.

Hey, listen to me.

Yes, sir.

Hi, Raj. Hi, Anil. How are you? Okay,
listen. There's something important that

want to talk to you about, right?

Say hi. Yeah, tell me.

Calls pour in each day by the dozens.

Rajaratnam talks freely, never knowing
that the FBI is listening.

We were observing the criminal activity
as it was happening. We had a window

into the schemes as they were being
hatched.

In July, investigators pick up a series
of calls with 42 -year -old Danielle

Chiesi, a trader at Newcastle Hedge
Fund.

Danielle Chiesi had a certain way about
her. She was not afraid to use her

feminine wiles, so to speak, to get
information.

On July 24th, KAC calls Raja Ratnam at
918 at night.

She's got top -secret information on
Akamai, an Internet services company.

They're going to guide down. I just got
a call from my guy. I played him like a

fine -tuned piano.

This company was going to guide down in
its earnings. It was going to tell Wall

Street that the results were not going
to be what traders expected.

That was going to mean a hit to the
stock.

His voice was matter of fact most of the
time. He was trying to get information,

trying to find out what people knew.
This was a man doing his job, but his

happened to be illegal.

I don't want anybody to know. Yeah,
radio silence.

If you just do radio silence, you do
what you have to do. Believe me, I'm

silent. That's the best thing I've heard
today. How about you?

When the markets open, Rajaratnam places
his bet and shorts Akamai.

Five days later, earnings are released.

The stock tumbles $7 a share.

The information pays big time.

Rajaratnam clears more than $5 million.

Hey, Nanny Raj.

I just wanted to say thank you.

And I wanted to tell you that it is my
pleasure.

I think you did it in such a classy way,
and that really maintained the

relationship.

She wanted approval and acceptance by
the big boys. He wanted Raj to tell her,

good job, girl. You know, you did it.

And so she would come to him with her
tip, really expecting nothing in return.

But it's a conquest, right?

It's a conquest. It's mentally fabulous
for me. And then I make decisions from a

position of strength.

He reveled in the conquest.

And in a lot of ways, Chiesi kind of
conflated that with sort of almost like

sex. It was that stimulating to her.

As investigators sift through hundreds
of phone calls, the other players in

Ratnam's circle begin to emerge.

There is Anil Kumar, the consultant at
McKinsey.

Rajiv Goel, a personal friend and
executive at Intel.

And Rajat Gupta, former head of McKinsey
and a board member of Goldman Sachs and

Procter & Gamble.

Each is risking their own career by
providing Rajaratnam with inside

information.

All this was going on while he knew that
there was at least an SEC investigation

going on, and yet it was brazen.

because I think he just didn't think he
could get caught.

By now, the feds have enough evidence to
obtain a judge's order to tap Chiesi's

phones. And soon, a whole slew of new
sources are reviewed.

The net brought in dozens of people who
were part of Rajaratnam's extended

circle of sources.

There is Bob Moffitt at IBM, who Chiesi
is having an affair with, and Kieran

Taylor,

TAC's source at Akamai.

I have a major present for you.

Drugs? No, no, no, no.

I hope not.

Inflammation. Are you kidding?

No.

Well, that is a great present.

Yeah, I know.

I love you for that. Why don't I see
you?

And from there, it spiraled.

A dizzying web of tipsters and
informants that grows every day.

And at the center of it all is Raj
Rajaratnam.

He had uncovered what is probably the
widest and broadest insider trading

operation in history.

When American greed returns, Rajaratnam
lands a source at the most powerful bank

on the street.

I'm going to call it 358, right?

Saying something good might happen to
the government.

To hear more of the FBI wiretaps, go to
AmericanGreed .CNBC .com. We'll be

right back.

In 2008, the landscape on Wall Street is
rapidly changing.

We had a sharp sell -off in stocks on
Wall Street today. Bank of America's

purchase of Merrill Lynch. The U .S.
economy is reeling from the worst

crisis in decades, and the markets are
in free fall.

It's 2008. It's the financial crisis.
Everything is falling apart.

It is next to impossible to get an edge
in the stock market.

And Galleon Group is not immune.

Investors are pulling money out, and
Rajaratnam is feeling the pressure.

Raj

lived

and died by the performance of the fund
every day. So sure, he was stressed, but

he was always stressed. I mean, he...

He did not seem like a guy who had a
billion or two billion in the bank. I

he went to work every day with a need to
win, just like somebody who, you know,

had to make money in order to eat next
week. So he was stressed in 08, but he

was always stressed.

The markets are getting hammered, but
Rajaratnam has an edge.

At the height of the crisis, prosecutors
allege, Rajaratnam reels in his biggest

source yet, Rajat Gupta.

Gupta is the former head of McKinsey &
Company, a board member of Procter &

Gamble and Goldman Sachs, and an
investor in Galleon.

Rajat Gupta was the most illustrious of
all of Rajaratnam's circle.

He was a man who consorted with kings
and heads of state and CEOs. He was at

top of that world.

Hey Raj, how is working from
Connecticut?

On July 29, Roger Ratnam takes a call
from Gupta.

As

a board

member, Gupta is privy to the inner
dealings of the most powerful investment

bank on the street.

Now, the government alleges... He is
telling Roger Rodnum all of Goldman's

secrets.

They are an opportunistic group, so
Vokovia was a good deal.

It's quite conceivable they'd come and
say, let's go buy Vokovia.

Or even AIG, right?

Or even AIG.

This is the most inside that information
gets. This was information from a board

meeting. There were moments when we
were, I guess, flabbergasted.

that the breadth of this web extended to
so many

high -level executives.

Six weeks later, Lehman Brothers has
gone bankrupt, and the big banks are all

fighting for survival.

But Goldman Sachs has a lifeline. The
company is in top -secret negotiations

with Warren Buffett to invest $5
billion.

The news is unexpected.

and will mean a certain boost to the
stock.

So the fact that Warren Buffett is going
to come in with $5 billion at the

depths of the crisis is huge.

And Rajaratnam has just golden
information that he can trade on.

On September 23rd, Gupta and the other
board members meet by a teleconference

approve the deal.

The government alleges that seconds
after hanging up from the call, Gupta

Rajaratnam on his office line.

A line that is not tapped.

As soon as they got off the phone, at 3
.58, Rajaratnam put in a trade order to

buy 350 ,000 shares of Goldman Sachs,
which was worth $43 million.

And that was two minutes before the
market closed. That's why they were

so much. They had only a few minutes to
get this done.

Shares of Goldman Sachs this morning,
sharply higher, actually. When the deal

announced the next day, Rajaratnam sells
his stock, making a quick $840 ,000.

So, big drama yesterday.

Yeah, I heard.

You mean the last three minutes of the
day?

No, I got a call at 3 .58, right?

Saying something good might happen to
Goldman.

And just like clockwork, one month
later, Gupta dials Raja Ratnam again,

seconds after the Goldman board call.

The news this month is startling.

Goldman Sachs is going to post its first
quarterly loss ever.

I heard yesterday from somebody who was
on the board of Goldman Sachs that they

are going to lose $2 per share.

The street has been making $2 .50.

Really? So what he was telling me was
that Goldman, the court is really bad,

so if it gets to 105, I'm going to whack
it, you know?

Rajaratnam dumps his holdings, more than
150 ,000 shares.

By selling before the news goes public,
Rajaratnam avoids a loss of $3 .8

million.

The whole world was at the edge of
collapse, the financial world. And they

so focused on continuing to get the edge
that it's as if they

were trying to keep their poker chips at
their side of the table

while playing a game on the deck of the
Titanic.

The whole ship is going down, and
they're still keeping their little

chips in play.

By now, McKinsey consultant Anil Kumar
has been funneling information to Raja

Ratnam for two years.

In August of 2008, he's the source of
some major news about AMD.

A foreign company has just agreed to a
multi -billion dollar cash infusion.

Hey, Raj.

Yeah, hi, Anil. Hi. So yesterday they've
shaken hands and said they're going

ahead with the deal.

So I think you can now just buy.

Great. How much are they investing?

They'll probably say they'll put up to
$6 to $8 billion.

You think we should start buying it now?
Yeah.

I think this stock could go to $10, you
know.

But we've got to keep this radio silent.

Oh, please. That is my pleasure.

Not even to your little boyfriends, you
know. No, believe me, I don't have any

friends. Okay.

With Chiesi, you knew that there was a
little bit of back and forth.

They were competing with each other to
some extent. So they're kind of playing

this game a little bit of who can get
the best information, who can use it.

So I have their numbers.

AMD? Is it that bad?

1600.

See? Came to the right place to get that
information.

Tell me I'm the best in AMD now.

There? I know. Look, I never say you're
not the best. It's hard to compete with

you, but one day I will surpass you.

This is AMD.

IBM, I can't crack. I must defer to you
on IBM.

And Akamai, too.

Akamai, too. But AMD, bring it on, baby.

The wiretaps are devastating.

They show Rajaratnam as someone who is
just... constantly working people and

bringing in as much information as he
could and not thinking at all about the

law.

In the end, agents record more than 2
,400 phone conversations.

The calls reveal a tangled web of
sources, creating the largest case of

trading ever.

I think he felt a sense of power, that
he had access to information that no one

else had.

and that he was able to profit by it.
It's kind of like taking a bite out of

forbidden fruit, except for here he was
feasting on the forbidden fruit.

When American Greed returns, the game is
up for Raja Ratnam.

How can you deny something that you put
on your e -mail or your text?

And it piles up and up, and it makes a
big pile that will bury you and put you

in a federal penitentiary.

By 2009, Raja Ratnam is back on top.

He has weathered the depths of the
financial crisis.

And Forbes magazine names him one of the
richest people in the world, with a net

worth of $1 .5 billion.

But behind the scenes, federal agents
have been investigating Raja Ratnam for

two and a half years.

On October 16th, FBI agents descend on
Rajaratnam's home, cuff him, and charge

him with 14 counts of conspiracy and
securities fraud.

The arrest sends shockwaves through the
markets.

Federal officials today announced what
they call the biggest hedge fund insider

trading case in history, and they warned
Wall Street to learn a lesson from it.

Rajaratnam is released on a $100 million
bond.

As he awaits trial, the government
arrests and prosecutes more than three

individuals caught up in the dragnet.
Among them, Anil Kumar and Rajiv Goel,

become cooperating witnesses and agree
to testify against their friend.

Danielle Chiesi, however, refuses to
cooperate.

And in the end, she had a code of honor,
which was that she didn't turn anyone

else in.

There were others who were...

perfectly willing to turn on their
former colleagues once they were in

GAC pleads guilty, and on July 20, 2011,
she is sentenced to two and a half

years in prison.

How do you mentally prepare yourself to
be able to go to prison?

Absolutely. What do you anticipate?

I anticipate to survive.

How will you do that?

By surviving, breathing.

Her mood was bizarre, and she seemed to
revel in the attention.

She was posing for the camera.

And I told the FBI, if they're ever
going to knock on my door again, do it

the afternoon.

Despite the mountain of evidence against
him, Roger Rottenham wants his day in

court.

The trial begins on March 8th in Lower
Manhattan.

The cornerstone of the government's case
is the wiretap evidence.

Prosecutors play more than 40 tapes,
Raja Ratnam's own voice echoing through

courtroom.

Everybody was rapt attention when those
tapes were played.

It really brought you inside in a way
that we'd never been brought inside

before.

The government's key witness is Anil
Kumar.

who tells the jury how Rajaratnam paid
him more than $2 million in exchange for

information.

Rajaratnam was looking at Kumar with
what I thought was undisguised contempt.

And this was a rare tell from
Rajaratnam, who was implacable

trial, gave away nothing, and never
spoke.

But when Kumar, when his old friend
Kumar was up there, I felt that he hated

him.

The defense argues that it wasn't
insider information.

Instead, it was painstaking, diligent
research that drove Roger Rotnam's

investment decisions.

The bottom line is, even the world's
greatest attorney can't save you if

caught red -handed in e -mail, in text
messages, on audio tape with phone

phone records. When the government
brings in evidence by the truckload,

going to bury you under that evidence.

The jury deliberates for 12 days and
then returns a verdict.

Guilty on all counts.

On October 13, 2011, Raja Ratnam is
sentenced to 11 years in prison and

to forfeit $63 .8 million.

It's the longest sentence for an insider
trading case ever.

But the worst isn't over yet for Raja
Ratnam.

A judge orders Rajaratnam to pay $92 .8
million to settle the civil case.

The message to Wall Street is very loud,
it's very clear.

Be afraid.

Be very afraid.

And for months, it appeared that Rajat
Gupta, the most prominent member of

Rajaratnam's circle, might not be
charged.

But on October 26, 2011... Gupta is
charged with five counts of fraud and

count of conspiracy to commit fraud.

Gupta has pleaded not guilty and his
attorneys say he never engaged in

trading.

He is expected to go to trial in 2012.

So Mr. Gupta is at an enormous
disadvantage because one jury of his

already decided that this was enough to
put his colleague Raj behind bars for an

extended period of time. So he's in a
very, very deep hole.

Raj Rajaratnam once had it all. He was
an immigrant who fought his way to the

top and became one of the richest men in
the world.

But his own greed ultimately was his
undoing.

99 % of what Galleon did?

It was entirely legitimate, driven by
very good analysts and very good

I don't see why Raj did what he did. It
just seemed totally unnecessary.

Raj seems to be someone who could have
made a fortune, made many fortunes,

without breaking the law. He was
extremely smart and knowledgeable and

hardworking.

But there seemed to be...

bigger challenge and a bigger thrill in
getting information that other people

couldn't get.

It was about being a multi -billionaire,
having $7 billion under management.

Whether that was just pure,
unadulterated greed that he was after or

was just the conquest, we may never
know.

But he wanted the money, and he got the
money, no matter what shortcuts he took

to get it.