1 00:00:00,000 --> 00:00:01,000 of American greed. 2 00:00:02,320 --> 00:00:07,180 It's one of the biggest cases of insider trading in history, and it's all caught 3 00:00:07,180 --> 00:00:08,180 on tape. 4 00:00:08,260 --> 00:00:12,520 I think this stock could go to $10, you know, but we've got to keep this radio 5 00:00:12,520 --> 00:00:13,520 silent. 6 00:00:13,920 --> 00:00:16,079 Raj Rajaratnam had it all. 7 00:00:16,280 --> 00:00:21,480 A wildly successful hedge fund, billions in the bank, and the respect of Wall 8 00:00:21,480 --> 00:00:25,820 Street. Raj was a competitor first. He wanted to win, he wanted to win every 9 00:00:25,820 --> 00:00:31,730 day. But behind closed doors, Roger Rottenham was gaming the system to the 10 00:00:31,730 --> 00:00:33,370 of $75 million. 11 00:00:34,190 --> 00:00:36,850 He thought trading became his business model. 12 00:00:37,270 --> 00:00:42,390 And each time Roger Rottenham's phone is ringing, the feds are listening. 13 00:00:42,990 --> 00:00:46,550 And ultimately, it's his own voice that will seal his fate. 14 00:00:46,910 --> 00:00:49,370 It's kind of like taking a bite out of the forbidden fruit. 15 00:00:49,750 --> 00:00:52,250 Except for here, he was feasting on the forbidden fruit. 16 00:01:09,100 --> 00:01:15,980 In January of 2008, Raj Rajaratnam is the head of a $7 billion hedge fund 17 00:01:15,980 --> 00:01:16,980 Galleon Group. 18 00:01:17,360 --> 00:01:20,940 His fund is generating stellar returns for investors. 19 00:01:21,480 --> 00:01:24,560 And Rajaratnam's phone is ringing off the hook. 20 00:01:25,080 --> 00:01:29,700 Many of the calls are from corporate insiders providing a gold mine of market 21 00:01:29,700 --> 00:01:30,700 -moving information. 22 00:01:31,360 --> 00:01:37,790 On July 24th, just after 9 p .m., Raja Ratnam takes a call from Danielle 23 00:01:37,790 --> 00:01:43,190 Chiesi. The former beauty queen is now a hedge fund trader and one of Raja 24 00:01:43,190 --> 00:01:44,690 Ratnam's best sources. 25 00:01:45,270 --> 00:01:49,210 I just got a call from my guy. I played him like a fine -tuned piano. 26 00:01:51,270 --> 00:01:57,070 Chiesi has the inside track on Akamai, a company that manages Internet traffic. 27 00:01:57,670 --> 00:02:00,010 She says the company will miss earnings. 28 00:02:00,330 --> 00:02:03,310 It's news that won't go public for six days. 29 00:02:17,200 --> 00:02:19,540 Raja Ratnam shorts the stock. 30 00:02:19,860 --> 00:02:23,380 In doing so, he will profit if the stock price falls. 31 00:02:24,140 --> 00:02:30,220 When earnings are announced on July 30th, the stock tumbles 25%, and Raja 32 00:02:30,220 --> 00:02:32,180 clears more than $5 million. 33 00:02:33,840 --> 00:02:39,900 But downtown at the FBI, agents are listening in to his every word, building 34 00:02:39,900 --> 00:02:43,100 case into the biggest insider trading ring in history. 35 00:02:45,120 --> 00:02:51,280 The story of Raj Rajaratnam begins an ocean away in the South Asian country of 36 00:02:51,280 --> 00:02:52,280 Sri Lanka. 37 00:02:52,380 --> 00:02:56,500 When Raj was growing up there, there was the civil war going on, and he grew up 38 00:02:56,500 --> 00:02:57,500 in relative prosperity. 39 00:02:57,680 --> 00:03:02,600 As a teen, Rajaratnam leaves his home country to begin schooling. 40 00:03:03,130 --> 00:03:04,170 in the Western world. 41 00:03:04,510 --> 00:03:09,630 He studies engineering in England and then earns a master's degree at the 42 00:03:09,630 --> 00:03:11,890 prestigious Wharton School of Business. 43 00:03:13,810 --> 00:03:16,090 Rajaratnam sets his sights on Wall Street. 44 00:03:16,670 --> 00:03:20,750 He heads to New York City and lands a job at Needham and Company. 45 00:03:21,870 --> 00:03:27,470 Wall Street Journal reporter Justin Sheck says Raj distinguished himself as 46 00:03:27,470 --> 00:03:30,050 stock analyst covering the computer chip industry. 47 00:03:30,630 --> 00:03:32,530 He was a great analyst, by all accounts. 48 00:03:33,200 --> 00:03:38,560 Raj had a knack for explaining how technologies worked and for telling 49 00:03:38,560 --> 00:03:39,580 why they should invest. 50 00:03:39,940 --> 00:03:43,400 And he was the person who knew the most about the chip industry. 51 00:03:46,060 --> 00:03:48,940 Rajaratnam proved to be a master networker. 52 00:03:49,180 --> 00:03:53,380 He forges tight relationships and presses his sources for information. 53 00:03:54,060 --> 00:03:58,600 Well, Raj got people to talk. He made executives feel comfortable and feel 54 00:03:58,600 --> 00:03:59,780 willing to confide in him. 55 00:04:00,000 --> 00:04:02,240 His sources became a long list. 56 00:04:02,460 --> 00:04:07,680 of Indian -born executives working at Silicon Valley firms. 57 00:04:09,240 --> 00:04:11,840 Rajaratnam works his way up the ranks at Needham. 58 00:04:12,100 --> 00:04:17,180 He is appointed head of research and then, in 1991, president. 59 00:04:18,360 --> 00:04:20,600 Raj was a very tough boss. 60 00:04:21,120 --> 00:04:26,220 Some people used the word browbeat. He would make the people working for him 61 00:04:26,220 --> 00:04:30,940 work as hard as he did to get inside companies and to really get exclusive 62 00:04:30,940 --> 00:04:31,940 information. 63 00:04:33,070 --> 00:04:37,510 The length Roger Rotnam will go to to dig up information is a lesson quickly 64 00:04:37,510 --> 00:04:41,030 learned by Gerald Fleming, an analyst at Needham. 65 00:04:41,230 --> 00:04:46,730 He had a Rolodex on his desk with probably more context than anybody I've 66 00:04:46,730 --> 00:04:47,730 known. 67 00:04:47,970 --> 00:04:51,550 In May of 1991, there's a telling moment. 68 00:04:51,910 --> 00:04:56,790 Fleming makes an earnings projection for Applied Material, a company that 69 00:04:56,790 --> 00:04:58,670 manufactures semiconductor machines. 70 00:04:59,390 --> 00:05:02,110 At the morning meeting, I talked about... 71 00:05:02,380 --> 00:05:03,900 my expectations. 72 00:05:04,640 --> 00:05:08,700 I felt that Applied's earnings would be somewhere around 41 cents a share. 73 00:05:09,060 --> 00:05:13,060 Raj went into his office, closed the door, made a phone call, and came out 74 00:05:13,060 --> 00:05:14,060 said, no, you're off by a penny. 75 00:05:14,300 --> 00:05:19,080 And Raj says, I have it from a very good source that Applied will report 42 76 00:05:19,080 --> 00:05:20,460 cents a share this afternoon. 77 00:05:22,180 --> 00:05:26,040 Hours later, the announcement is made, and Fleming is stunned. 78 00:05:27,100 --> 00:05:30,560 Rajaratnam had the exact number, 42 cents per share. 79 00:05:31,230 --> 00:05:32,330 before anyone else. 80 00:05:32,670 --> 00:05:37,290 After experiencing a couple of these episodes where Raj had clearly gotten 81 00:05:37,290 --> 00:05:42,670 inside information, I started to become more and more wary about what was going 82 00:05:42,670 --> 00:05:43,670 on. 83 00:05:44,610 --> 00:05:49,070 After ten months on the job, Fleming has had enough and quits. 84 00:05:50,430 --> 00:05:55,390 Rajaratnam may be alienating some with his hardball tactics, but his reach and 85 00:05:55,390 --> 00:05:56,970 power continue to expand. 86 00:05:58,270 --> 00:06:01,530 In 1992, he starts a hedge fund at Needham. 87 00:06:02,010 --> 00:06:05,930 Two years later, he is taking home a million dollars a year. 88 00:06:06,430 --> 00:06:09,030 Still, Rajaratnam wants more. 89 00:06:10,950 --> 00:06:17,090 In November of 1996, he sets up shop in a small office on 57th Street and 90 00:06:17,090 --> 00:06:21,190 launches his own hedge fund. He names it Galleon Group. 91 00:06:21,840 --> 00:06:26,400 Raj named his new hedge fund Galleon after Spanish ships that would travel 92 00:06:26,400 --> 00:06:32,140 world carrying great wealth in the form of spices and gold and all sorts of 93 00:06:32,140 --> 00:06:36,180 riches. And it was sort of a big name to convey wealth. 94 00:06:36,640 --> 00:06:42,140 With investors anxious to ride the technology boom, funding comes easily. 95 00:06:42,600 --> 00:06:49,580 It was a real go -go, heavy trading, fast trading, and very profitable hedge 96 00:06:49,580 --> 00:06:50,580 fund from the... 97 00:06:50,720 --> 00:06:52,060 the heyday of the hedge funds. 98 00:06:52,760 --> 00:06:59,600 After just one year, Rajaratnam has $800 million under management, and Galleon 99 00:06:59,600 --> 00:07:00,620 is flying high. 100 00:07:01,000 --> 00:07:05,000 At his new firm, Rajaratnam fosters a high -stakes environment. 101 00:07:05,640 --> 00:07:09,820 It's an intensely competitive environment, and if you don't produce, 102 00:07:09,820 --> 00:07:10,820 fired. 103 00:07:11,540 --> 00:07:17,300 Rajaratnam leads by example and continues pressing his sources and 104 00:07:17,300 --> 00:07:18,540 up exclusive information. 105 00:07:19,340 --> 00:07:22,620 But those tactics are continuing to raise some red flags. 106 00:07:23,320 --> 00:07:27,040 There were some executives in the Valley who felt like Raj was too aggressive. 107 00:07:28,280 --> 00:07:33,360 Over at Intel Corporation, executives are having closed -door meetings about 108 00:07:33,360 --> 00:07:38,520 Rajaratnam. And his research on Intel that he would publish was 109 00:07:38,520 --> 00:07:42,840 accurate for a number of years, and accurate to the point where top Intel 110 00:07:42,840 --> 00:07:47,220 executives became concerned that Raj was getting information leaked to him. 111 00:07:48,240 --> 00:07:50,840 Intel executives decide to take action. 112 00:07:51,080 --> 00:07:54,360 They set up hidden cameras around the office and wait. 113 00:07:55,400 --> 00:08:00,900 On March 6th, they capture video of a product marketing engineer named Rumi 114 00:08:00,900 --> 00:08:03,000 faxing confidential information. 115 00:08:03,740 --> 00:08:09,900 They caught an employee sending faxes to Raj of very detailed numbers about chip 116 00:08:09,900 --> 00:08:14,720 orders from big computer makers and other details that Raj could use to 117 00:08:14,720 --> 00:08:18,280 calculate approximately what the company's... earnings would be, and it's 118 00:08:18,280 --> 00:08:19,280 valuable information. 119 00:08:21,020 --> 00:08:25,400 Intel reports Kahn to authorities, who launch an investigation. 120 00:08:25,920 --> 00:08:30,420 She actually went to work for Galleon, spent about a year there, but in 2001 121 00:08:30,420 --> 00:08:31,540 ended up pleading guilty. 122 00:08:32,400 --> 00:08:37,640 Kahn serves six months of house arrest, but Rajaratnam slips by. 123 00:08:38,380 --> 00:08:42,440 Investigators can't prove that he ever traded on the inside information, and 124 00:08:42,440 --> 00:08:43,460 case is sealed. 125 00:08:45,480 --> 00:08:51,680 Coming up on American Greed, Roger Rodman lands a new source and makes $23 126 00:08:51,680 --> 00:08:53,740 million off a single tip. 127 00:08:54,140 --> 00:08:57,400 He wanted to win. He was intensely competitive. 128 00:08:57,980 --> 00:09:01,160 And how he won mattered less than winning. 129 00:09:09,130 --> 00:09:15,990 In 2003, Sri Lankan -born Raj Rajaratnam is a self -made multimillionaire. 130 00:09:16,170 --> 00:09:21,530 His fund, Galleon Group, is growing rapidly and generating impressive 131 00:09:21,530 --> 00:09:22,530 for investors. 132 00:09:22,990 --> 00:09:27,230 But Rajaratnam's success is not built on his trading expertise alone. 133 00:09:27,450 --> 00:09:33,070 It is built on his Rolodex and a vast network of insiders who are funneling 134 00:09:33,070 --> 00:09:34,070 information. 135 00:09:34,250 --> 00:09:37,290 For him, it wasn't just about getting rich. It was about winning. It was 136 00:09:37,290 --> 00:09:42,740 about... knowing more than the other guy and making more on a company than the 137 00:09:42,740 --> 00:09:43,740 next fund. 138 00:09:44,320 --> 00:09:51,080 In 2006, Raja Ratnam sets his sights on a new source, Anil 139 00:09:51,080 --> 00:09:55,860 Kumar, an old classmate from business school who now works at the prestigious 140 00:09:55,860 --> 00:09:58,500 consulting firm McKenzie and Company. 141 00:09:59,080 --> 00:10:04,340 Kumar and McKenzie wanted Galleon to hire them as consultants. 142 00:10:05,550 --> 00:10:09,470 Rajaratnam and Kumar met in the fall of 2003 at a charity event in New York. And 143 00:10:09,470 --> 00:10:13,630 on the way out, Kumar basically said, what's going on, Raj? We've been trying 144 00:10:13,630 --> 00:10:17,790 set up this business arrangement, and we don't even hear back from you. 145 00:10:18,430 --> 00:10:23,210 And Rajaratnam replied, I don't want McKinsey's help. I want your help. 146 00:10:25,510 --> 00:10:31,310 Rajaratnam asks Kumar to serve as his personal consultant and offers him half 147 00:10:31,310 --> 00:10:33,170 million dollars a year for his expertise. 148 00:10:33,950 --> 00:10:38,170 McKenzie forbids outside consulting, but Rajaratnam persists. 149 00:10:38,590 --> 00:10:42,010 He said to Kumar, you work very, very hard. 150 00:10:42,650 --> 00:10:48,450 Other people make a lot more money than you. You travel all the time, and you 151 00:10:48,450 --> 00:10:49,450 deserve better. 152 00:10:49,470 --> 00:10:55,050 So Raj shrewdly reeled him in by appealing to his sense of being 153 00:10:55,050 --> 00:10:56,130 underappreciated. 154 00:10:57,330 --> 00:11:02,530 To evade detection, Rajaratnam proposes an elaborate cover -up. 155 00:11:02,730 --> 00:11:06,470 using offshore accounts and shell companies to conceal the payments. 156 00:11:07,030 --> 00:11:11,490 Soon, Kumar is funneling Rajaratnam secrets from his corporate clients. 157 00:11:12,390 --> 00:11:18,810 In 2006, he is consulting for a microprocessor maker called Advanced 158 00:11:18,810 --> 00:11:21,050 Devices, or AMD. 159 00:11:21,370 --> 00:11:26,770 The company is in a top -secret bid to acquire ATI, a graphics chip company. 160 00:11:28,390 --> 00:11:31,830 and no one on Wall Street knew that this was happening, or when there were 161 00:11:31,830 --> 00:11:35,870 rumors floated, everyone thought it was crazy, didn't make sense, couldn't 162 00:11:35,870 --> 00:11:36,870 happen. 163 00:11:36,990 --> 00:11:41,050 Roger Rottenham knew it was going to happen, and he knew because Kumar knew 164 00:11:41,050 --> 00:11:44,190 had told him, and Kumar knew because he was in on all the strategy meetings. 165 00:11:45,470 --> 00:11:51,530 Roger Rottenham buys ATI stock ahead of the acquisition and then sits back and 166 00:11:51,530 --> 00:11:54,770 waits. For an investor, information on a company is power. 167 00:11:54,970 --> 00:11:59,530 The more you know about a company and the sooner you know it, the better 168 00:11:59,530 --> 00:12:01,370 equipped you are to beat the rest of the market. 169 00:12:02,590 --> 00:12:08,910 When the deal goes public, ATI stock shoots up 25 % and Roger Rodman clears 170 00:12:08,910 --> 00:12:10,610 $23 million. 171 00:12:11,590 --> 00:12:14,610 For Roger Rodman, it's his best year to date. 172 00:12:14,930 --> 00:12:17,610 He takes home more than $300 million. 173 00:12:18,590 --> 00:12:21,890 Roger Rodman appears to be living the American dream. 174 00:12:22,699 --> 00:12:28,660 He lives with his wife and three kids in a $17 million duplex on Manhattan's 175 00:12:28,660 --> 00:12:29,660 east side. 176 00:12:30,100 --> 00:12:35,940 He owns a $5 million estate in exclusive Greenwich, Connecticut, and a vacation 177 00:12:35,940 --> 00:12:39,740 home in Miami at the luxurious Setai Resort. 178 00:12:40,440 --> 00:12:47,340 Raj had nice homes and rided very well for himself and his family, but he also 179 00:12:47,340 --> 00:12:51,260 spent a lot of money in charity. He was someone who was seen as very generous. 180 00:12:53,610 --> 00:12:57,710 In 2007, Galleon Group's growth is explosive. 181 00:12:58,770 --> 00:13:04,730 Rajaratnam has $7 billion under management and expands into new offices 182 00:13:04,730 --> 00:13:05,730 Madison Avenue. 183 00:13:05,890 --> 00:13:12,550 He now has more than 100 employees working for him, including Tim Perotti, 184 00:13:12,670 --> 00:13:15,090 who manages a consumer goods fund. 185 00:13:16,080 --> 00:13:20,760 Raj worked very hard. He got to the office, I would say, at 7 .30 every day. 186 00:13:20,760 --> 00:13:23,000 think he rarely left before 7 .30, 8 o 'clock. 187 00:13:23,200 --> 00:13:28,040 Raj wanted to win every day, and he wanted guys around him who were very 188 00:13:28,040 --> 00:13:29,160 competitive and wanted to win. 189 00:13:30,980 --> 00:13:36,340 Each day at Galleon begins with the morning meeting, an event feared and 190 00:13:36,340 --> 00:13:37,360 by many employees. 191 00:13:38,160 --> 00:13:42,060 It was 8 .35 sharp. Raj would be at the head of the... 192 00:13:42,330 --> 00:13:46,210 massive conference room table, and you didn't know who was going to get called 193 00:13:46,210 --> 00:13:47,550 on, and you just had to be prepared. 194 00:13:48,930 --> 00:13:52,470 What are your best bets? What's your trading strategy based on what? 195 00:13:53,130 --> 00:13:57,490 And Raj had a way of finding out what you didn't know. He wanted people to 196 00:13:57,490 --> 00:14:01,010 that if you come to the morning meeting unprepared, you're going to pay for it. 197 00:14:02,250 --> 00:14:07,310 The culture at Galleon is one of testing professional limits, but Rajaratnam 198 00:14:07,310 --> 00:14:10,050 seems to revel in testing personal limits too. 199 00:14:10,740 --> 00:14:13,060 He liked to play pranks on workers. 200 00:14:13,680 --> 00:14:18,200 Executives from Taser, which makes stun guns, came to Galleon to explain to 201 00:14:18,200 --> 00:14:20,100 Galleon why they should invest in Taser. 202 00:14:20,480 --> 00:14:23,160 They said, our equipment is very safe. 203 00:14:23,540 --> 00:14:24,880 We can tase someone here. 204 00:14:25,320 --> 00:14:27,700 So he said, who wants to get tased? I'll give you $5 ,000. 205 00:14:28,600 --> 00:14:32,800 A woman on the trading desk took him up on it, and so they tased her. 206 00:14:33,860 --> 00:14:37,640 She fell to the ground, and Raj gave her $5 ,000. 207 00:14:38,730 --> 00:14:44,230 And on April Fool's Day, Roger Rodham hires a dwarf to make a presentation to 208 00:14:44,230 --> 00:14:45,230 his staff. 209 00:14:45,270 --> 00:14:49,330 And Rod said, you know, this person is a new analyst for small cap companies. 210 00:14:49,550 --> 00:14:52,470 A small cap company is a company with a small market capitalization. 211 00:14:52,710 --> 00:14:56,930 It was an April Fool's joke, and he just wanted to, you know, make everyone 212 00:14:56,930 --> 00:14:57,930 laugh. 213 00:14:59,730 --> 00:15:04,390 Roger Rodham is playing by his own rules and seems unstoppable. 214 00:15:06,050 --> 00:15:08,010 But when American Greed returns... 215 00:15:08,640 --> 00:15:13,480 One of Rajaratnam's trusted informants turns on him, and the feds pick up the 216 00:15:13,480 --> 00:15:14,480 case. 217 00:15:20,700 --> 00:15:24,940 Endless pools are an incredible alternative to traditional pools, making 218 00:15:24,940 --> 00:15:28,980 and inexpensive to swim at home. 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A free idea kit and DVD will be sent to your home so you can... 220 00:15:37,740 --> 00:15:44,000 In 2007, Raj Rajaratnam is running one of the world's largest and most powerful 221 00:15:44,000 --> 00:15:45,000 hedge funds. 222 00:15:45,620 --> 00:15:50,320 Rajaratnam has cemented his reputation as a superstar on Wall Street and is 223 00:15:50,320 --> 00:15:51,640 relishing his success. 224 00:15:52,420 --> 00:15:55,540 He threw a lot of really good parties. 225 00:15:56,480 --> 00:16:02,000 In June, he charters a yacht for a raucous 50th birthday party cruising 226 00:16:02,000 --> 00:16:03,360 the Manhattan skyline. 227 00:16:04,120 --> 00:16:05,680 And in September... 228 00:16:06,160 --> 00:16:09,880 He hires country legend Kenny Rogers to play a private concert. 229 00:16:10,900 --> 00:16:15,420 So Rogers had this big cowboy -themed clambake at his home in Greenwich. 230 00:16:15,620 --> 00:16:20,340 And, you know, Kenny Rogers was a favorite of Rogers because of his song, 231 00:16:20,340 --> 00:16:21,340 know, The Gambler. 232 00:16:22,040 --> 00:16:26,440 No one to hold him, no one to fold him. And it was a song that Rogers really, 233 00:16:26,480 --> 00:16:27,480 really loved. 234 00:16:27,960 --> 00:16:31,680 Kenny came with two tractor trailers of equipment. He played for an hour. He 235 00:16:31,680 --> 00:16:32,680 played The Gambler twice. 236 00:16:33,870 --> 00:16:39,670 On the surface, Roger Rottenham seems untouchable. But behind the scenes, his 237 00:16:39,670 --> 00:16:41,210 world is beginning to unravel. 238 00:16:42,330 --> 00:16:47,230 For the past seven months, agents at the SEC have been investigating Roger 239 00:16:47,230 --> 00:16:52,350 Rottenham on suspicions of insider trading after an anonymous tip led them 240 00:16:52,350 --> 00:16:53,350 Galleon. 241 00:16:53,530 --> 00:16:59,570 In February of 2007, SEC agents subpoena Galleon's electronic records. 242 00:17:00,350 --> 00:17:05,569 With more than 10 ,000 documents to review, the search is like looking for a 243 00:17:05,569 --> 00:17:06,890 needle in a haystack. 244 00:17:07,390 --> 00:17:14,290 The SEC began sifting through massive numbers of instant messages. And for 245 00:17:14,290 --> 00:17:17,930 six months, they began to see more patterns of insider trading. 246 00:17:19,190 --> 00:17:22,089 But Raja Ratnam thinks he is protected. 247 00:17:22,349 --> 00:17:25,490 He has been diligent about covering his trail. 248 00:17:25,829 --> 00:17:28,610 Raja Ratnam basically told his... 249 00:17:29,040 --> 00:17:35,200 core of trusted collaborators on the inside trading that they should get off 250 00:17:35,200 --> 00:17:40,300 instant messaging. They should do it on the phone because the IMs were going to 251 00:17:40,300 --> 00:17:42,420 be clocked by the SEC. 252 00:17:44,220 --> 00:17:49,600 After months of meticulous research, an investigator turns up a string of 253 00:17:49,600 --> 00:17:55,060 suspicious instant messages from someone with a screen name of Rumi 81. 254 00:17:55,580 --> 00:17:57,120 Roger Rodman is subpoenaed. 255 00:17:57,350 --> 00:17:59,230 and brought in for seven hours of questioning. 256 00:18:00,230 --> 00:18:03,750 And all of this kind of had the air of routineness. 257 00:18:04,690 --> 00:18:10,790 Registered investment advisor, SEC wants to look at some of their records, wants 258 00:18:10,790 --> 00:18:13,490 to talk to the manager. These things happen a lot. 259 00:18:13,810 --> 00:18:17,690 So Raja Ratnam seemed to be kind of in a mood of, I can game this thing. 260 00:18:17,910 --> 00:18:19,690 And he went in and told a lot of lies. 261 00:18:20,870 --> 00:18:26,450 When investigators ask about Rumi 81, Raja Ratnam provides a name. 262 00:18:26,920 --> 00:18:32,960 She turned out to be Rumi Khan, the woman who pled guilty to inside trading 263 00:18:32,960 --> 00:18:35,420 decade earlier and had gone on probation. 264 00:18:35,860 --> 00:18:37,420 She was back in the game. 265 00:18:38,520 --> 00:18:42,680 Days later, investigators find their smoking gun. 266 00:18:43,060 --> 00:18:49,880 The FCC, Florida Sound and IM, had Rumi Khan saying to Raj, do not buy 267 00:18:49,880 --> 00:18:53,100 Polycom till I get guidance. 268 00:18:53,780 --> 00:18:55,680 Polycom is a video conferencing. 269 00:18:56,899 --> 00:19:01,000 and guidance means the direction that their earnings are going to go up or 270 00:19:01,080 --> 00:19:03,960 It seemed like very specific inside information. 271 00:19:04,360 --> 00:19:10,580 It was like the one moment when Rajaratnam could not get his source to 272 00:19:10,580 --> 00:19:12,080 vague on IM. 273 00:19:12,400 --> 00:19:16,600 That should have been said over the phone, but she was trying to get it to 274 00:19:16,600 --> 00:19:18,960 quickly, and she said it on IM. 275 00:19:24,240 --> 00:19:28,500 They discovered calls to a Polycom employee, Kahn's apparent source. 276 00:19:29,200 --> 00:19:34,920 So they began to build up this circumstantial case of phone records 277 00:19:34,920 --> 00:19:38,740 they were talking, trading records showing that they were trading the same 278 00:19:38,740 --> 00:19:41,020 stocks and making a lot of money on them. 279 00:19:41,720 --> 00:19:46,580 It's a huge break, but investigators believe the case is still too 280 00:19:46,580 --> 00:19:51,440 circumstantial. What they need is one of Raja Ratnam's informants to flip. 281 00:19:51,880 --> 00:19:53,280 They had Rumi Kahn. 282 00:19:54,460 --> 00:19:59,500 She was going to be a good target because she had the prior conviction. 283 00:19:59,840 --> 00:20:00,860 She was vulnerable. 284 00:20:01,360 --> 00:20:03,640 She actually was having financial trouble. 285 00:20:04,540 --> 00:20:07,240 And they had the IM. 286 00:20:07,920 --> 00:20:13,760 But still, they didn't know. And once they tried to flip her, if it failed, 287 00:20:13,760 --> 00:20:18,040 she told Raja Ratnam, that might be the end of the case. So this was all very 288 00:20:18,040 --> 00:20:22,000 dicey, you know, nail -biting, white -knuckle stuff. 289 00:20:23,980 --> 00:20:30,880 On November 28, 2007, FBI agents approached Rumi Khan at her home in 290 00:20:31,020 --> 00:20:36,600 California. Rumi Khan lived in great splendor. Her house had six and a half 291 00:20:36,600 --> 00:20:41,080 bathrooms, tennis court, swimming pool. 292 00:20:41,520 --> 00:20:46,280 She allowed them in, and she lied and lied and lied some more. And then 293 00:20:46,280 --> 00:20:52,440 they brought out the IMs, including the do not buy Polycom until I get guidance. 294 00:20:53,480 --> 00:20:58,860 At which point, she retreated to one of the six -and -a -half bathrooms and had 295 00:20:58,860 --> 00:21:04,840 a cry and came back out and said, I know if I don't cooperate, I'm going to go 296 00:21:04,840 --> 00:21:05,840 to jail. 297 00:21:06,520 --> 00:21:10,720 Khan agrees to flip and becomes an FBI informant. 298 00:21:11,240 --> 00:21:15,880 Now, with tape rolling, she calls Rajaratnam and tries to bait him. 299 00:21:16,160 --> 00:21:18,900 I think he sensed that she was a weakling. 300 00:21:19,450 --> 00:21:21,170 He was always trying to get her off the phone. 301 00:21:21,490 --> 00:21:24,790 And she was trying to get him to stay on the phone long enough to say something 302 00:21:24,790 --> 00:21:29,490 a little bit incriminating. And on a couple of occasions in January 08, he 303 00:21:31,630 --> 00:21:36,330 Investigators have what they need to win a judge's approval to tap Raja Ratnam's 304 00:21:36,330 --> 00:21:40,390 phone. It's an aggressive tactic rarely seen in white -collar cases. 305 00:21:40,990 --> 00:21:45,550 When American Greed returns, Raja Ratnam is caught on tape. 306 00:21:46,390 --> 00:21:47,850 You think we should start buying it now? 307 00:21:48,050 --> 00:21:51,420 Yeah. I mean, I think this stock could go to $10, you know. 308 00:21:52,100 --> 00:21:53,880 But we've got to keep this radio silent. 309 00:21:54,100 --> 00:21:55,059 Oh, please. 310 00:21:55,060 --> 00:21:56,080 That is my pleasure. 311 00:22:13,360 --> 00:22:18,780 In March of 2008, Raj Rajaratnam is the target of a covert federal 312 00:22:18,780 --> 00:22:19,780 investigation. 313 00:22:20,480 --> 00:22:25,460 Agents suspect the hedge fund titan is the mastermind of a large insider 314 00:22:25,460 --> 00:22:28,020 ring and are moving aggressively in their pursuit. 315 00:22:29,340 --> 00:22:33,260 Josh Klein is an assistant U .S. attorney working the case. 316 00:22:33,660 --> 00:22:37,920 So this began to look like a conspiracy or a series of conspiracies that 317 00:22:37,920 --> 00:22:40,440 straddled Wall Street and Silicon Valley. 318 00:22:42,250 --> 00:22:46,470 On March 10th, the wiretap goes live on Rajaratnam's cell phone. 319 00:22:46,810 --> 00:22:51,330 And for the first time, agents are taken inside Rajaratnam's world. 320 00:22:52,190 --> 00:22:53,049 Hi, Dave. 321 00:22:53,050 --> 00:22:54,050 Hey, listen to me. 322 00:22:54,210 --> 00:22:54,769 Yes, sir. 323 00:22:54,770 --> 00:22:58,490 Hi, Raj. Hi, Anil. How are you? Okay, listen. There's something important that 324 00:22:58,490 --> 00:22:59,590 want to talk to you about, right? 325 00:23:00,430 --> 00:23:02,210 Say hi. Yeah, tell me. 326 00:23:03,710 --> 00:23:06,130 Calls pour in each day by the dozens. 327 00:23:06,930 --> 00:23:11,090 Rajaratnam talks freely, never knowing that the FBI is listening. 328 00:23:11,740 --> 00:23:16,660 We were observing the criminal activity as it was happening. We had a window 329 00:23:16,660 --> 00:23:20,200 into the schemes as they were being hatched. 330 00:23:21,120 --> 00:23:26,380 In July, investigators pick up a series of calls with 42 -year -old Danielle 331 00:23:26,380 --> 00:23:29,780 Chiesi, a trader at Newcastle Hedge Fund. 332 00:23:30,240 --> 00:23:35,400 Danielle Chiesi had a certain way about her. She was not afraid to use her 333 00:23:35,400 --> 00:23:38,180 feminine wiles, so to speak, to get information. 334 00:23:39,720 --> 00:23:44,740 On July 24th, KAC calls Raja Ratnam at 918 at night. 335 00:23:45,400 --> 00:23:49,980 She's got top -secret information on Akamai, an Internet services company. 336 00:23:50,820 --> 00:23:54,820 They're going to guide down. I just got a call from my guy. I played him like a 337 00:23:54,820 --> 00:23:55,860 fine -tuned piano. 338 00:23:56,900 --> 00:24:00,500 This company was going to guide down in its earnings. It was going to tell Wall 339 00:24:00,500 --> 00:24:04,860 Street that the results were not going to be what traders expected. 340 00:24:05,200 --> 00:24:06,980 That was going to mean a hit to the stock. 341 00:24:21,129 --> 00:24:26,050 His voice was matter of fact most of the time. He was trying to get information, 342 00:24:26,250 --> 00:24:31,890 trying to find out what people knew. This was a man doing his job, but his 343 00:24:31,890 --> 00:24:32,890 happened to be illegal. 344 00:24:34,280 --> 00:24:36,660 I don't want anybody to know. Yeah, radio silence. 345 00:24:36,980 --> 00:24:40,800 If you just do radio silence, you do what you have to do. Believe me, I'm 346 00:24:40,800 --> 00:24:43,060 silent. That's the best thing I've heard today. How about you? 347 00:24:44,620 --> 00:24:49,780 When the markets open, Rajaratnam places his bet and shorts Akamai. 348 00:24:50,960 --> 00:24:53,280 Five days later, earnings are released. 349 00:24:53,580 --> 00:24:56,180 The stock tumbles $7 a share. 350 00:24:57,260 --> 00:24:59,540 The information pays big time. 351 00:25:00,140 --> 00:25:02,720 Rajaratnam clears more than $5 million. 352 00:25:04,110 --> 00:25:05,110 Hey, Nanny Raj. 353 00:25:05,450 --> 00:25:07,130 I just wanted to say thank you. 354 00:25:07,490 --> 00:25:10,610 And I wanted to tell you that it is my pleasure. 355 00:25:10,910 --> 00:25:15,570 I think you did it in such a classy way, and that really maintained the 356 00:25:15,570 --> 00:25:16,570 relationship. 357 00:25:16,670 --> 00:25:23,330 She wanted approval and acceptance by the big boys. He wanted Raj to tell her, 358 00:25:23,370 --> 00:25:25,670 good job, girl. You know, you did it. 359 00:25:25,890 --> 00:25:32,630 And so she would come to him with her tip, really expecting nothing in return. 360 00:25:33,520 --> 00:25:34,860 But it's a conquest, right? 361 00:25:35,620 --> 00:25:41,400 It's a conquest. It's mentally fabulous for me. And then I make decisions from a 362 00:25:41,400 --> 00:25:42,400 position of strength. 363 00:25:43,000 --> 00:25:44,480 He reveled in the conquest. 364 00:25:44,900 --> 00:25:50,700 And in a lot of ways, Chiesi kind of conflated that with sort of almost like 365 00:25:50,700 --> 00:25:53,980 sex. It was that stimulating to her. 366 00:25:55,180 --> 00:26:00,140 As investigators sift through hundreds of phone calls, the other players in 367 00:26:00,140 --> 00:26:01,900 Ratnam's circle begin to emerge. 368 00:26:03,070 --> 00:26:06,630 There is Anil Kumar, the consultant at McKinsey. 369 00:26:07,170 --> 00:26:10,990 Rajiv Goel, a personal friend and executive at Intel. 370 00:26:11,370 --> 00:26:16,950 And Rajat Gupta, former head of McKinsey and a board member of Goldman Sachs and 371 00:26:16,950 --> 00:26:18,070 Procter and Gamble. 372 00:26:19,090 --> 00:26:23,870 Each is risking their own career by providing Rajaratnam with inside 373 00:26:23,870 --> 00:26:24,870 information. 374 00:26:25,230 --> 00:26:29,370 All this was going on while he knew that there was at least an SEC investigation 375 00:26:29,370 --> 00:26:31,930 going on, and yet it was brazen. 376 00:26:32,380 --> 00:26:35,220 because I think he just didn't think he could get caught. 377 00:26:35,900 --> 00:26:40,880 By now, the feds have enough evidence to obtain a judge's order to tap Chiesi's 378 00:26:40,880 --> 00:26:45,340 phones. And soon, a whole slew of new sources are reviewed. 379 00:26:46,100 --> 00:26:52,120 The net brought in dozens of people who were part of Rajaratnam's extended 380 00:26:52,120 --> 00:26:53,760 circle of sources. 381 00:26:55,220 --> 00:27:01,300 There is Bob Moffitt at IBM, who Chiesi is having an affair with, and Kieran 382 00:27:01,300 --> 00:27:02,300 Taylor, 383 00:27:02,440 --> 00:27:04,120 TAC's source at Akamai. 384 00:27:05,040 --> 00:27:06,720 I have a major present for you. 385 00:27:07,400 --> 00:27:09,540 Drugs? No, no, no, no. 386 00:27:09,760 --> 00:27:10,760 I hope not. 387 00:27:11,060 --> 00:27:12,500 Inflammation. Are you kidding? 388 00:27:13,180 --> 00:27:14,180 No. 389 00:27:15,500 --> 00:27:17,580 Well, that is a great present. 390 00:27:17,980 --> 00:27:18,980 Yeah, I know. 391 00:27:19,280 --> 00:27:21,560 I love you for that. Why don't I see you? 392 00:27:22,720 --> 00:27:25,320 And from there, it spiraled. 393 00:27:25,880 --> 00:27:29,840 A dizzying web of tipsters and informants that grows every day. 394 00:27:30,120 --> 00:27:32,860 And at the center of it all is Raj Rajaratnam. 395 00:27:33,160 --> 00:27:39,120 He had uncovered what is probably the widest and broadest insider trading 396 00:27:39,120 --> 00:27:40,540 operation in history. 397 00:27:41,800 --> 00:27:48,040 When American greed returns, Rajaratnam lands a source at the most powerful bank 398 00:27:48,040 --> 00:27:49,040 on the street. 399 00:27:49,140 --> 00:27:51,680 I'm going to call it 358, right? 400 00:27:51,980 --> 00:27:54,380 Saying something good might happen to the government. 401 00:27:56,140 --> 00:28:03,140 To hear more of the FBI wiretaps, go to AmericanGreed .CNBC .com. We'll be 402 00:28:03,140 --> 00:28:04,140 right back. 403 00:28:13,360 --> 00:28:17,980 In 2008, the landscape on Wall Street is rapidly changing. 404 00:28:18,200 --> 00:28:21,600 We had a sharp sell -off in stocks on Wall Street today. Bank of America's 405 00:28:21,600 --> 00:28:26,040 purchase of Merrill Lynch. The U .S. economy is reeling from the worst 406 00:28:26,040 --> 00:28:29,440 crisis in decades, and the markets are in free fall. 407 00:28:30,260 --> 00:28:34,140 It's 2008. It's the financial crisis. Everything is falling apart. 408 00:28:34,520 --> 00:28:38,080 It is next to impossible to get an edge in the stock market. 409 00:28:38,340 --> 00:28:40,620 And Galleon Group is not immune. 410 00:28:41,889 --> 00:28:46,390 Investors are pulling money out, and Rajaratnam is feeling the pressure. 411 00:28:50,630 --> 00:28:51,110 Raj 412 00:28:51,110 --> 00:29:02,550 lived 413 00:29:02,550 --> 00:29:06,410 and died by the performance of the fund every day. So sure, he was stressed, but 414 00:29:06,410 --> 00:29:08,730 he was always stressed. I mean, he... 415 00:29:10,120 --> 00:29:13,920 He did not seem like a guy who had a billion or two billion in the bank. I 416 00:29:13,920 --> 00:29:20,020 he went to work every day with a need to win, just like somebody who, you know, 417 00:29:20,020 --> 00:29:23,980 had to make money in order to eat next week. So he was stressed in 08, but he 418 00:29:23,980 --> 00:29:24,980 was always stressed. 419 00:29:26,360 --> 00:29:29,940 The markets are getting hammered, but Rajaratnam has an edge. 420 00:29:31,260 --> 00:29:36,240 At the height of the crisis, prosecutors allege, Rajaratnam reels in his biggest 421 00:29:36,240 --> 00:29:38,540 source yet, Rajat Gupta. 422 00:29:39,560 --> 00:29:44,020 Gupta is the former head of McKinsey and Company, a board member of Procter and 423 00:29:44,020 --> 00:29:48,200 Gamble and Goldman Sachs, and an investor in Galleon. 424 00:29:49,120 --> 00:29:54,480 Rajat Gupta was the most illustrious of all of Rajaratnam's circle. 425 00:29:55,060 --> 00:30:01,820 He was a man who consorted with kings and heads of state and CEOs. He was at 426 00:30:01,820 --> 00:30:04,020 top of that world. 427 00:30:04,600 --> 00:30:06,820 Hey Raj, how is working from Connecticut? 428 00:30:07,720 --> 00:30:12,360 On July 29, Roger Ratnam takes a call from Gupta. 429 00:30:17,940 --> 00:30:18,620 As 430 00:30:18,620 --> 00:30:25,500 a board 431 00:30:25,500 --> 00:30:29,760 member, Gupta is privy to the inner dealings of the most powerful investment 432 00:30:29,760 --> 00:30:30,960 bank on the street. 433 00:30:31,440 --> 00:30:36,380 Now, the government alleges... He is telling Roger Rodnum all of Goldman's 434 00:30:36,380 --> 00:30:37,380 secrets. 435 00:30:37,560 --> 00:30:42,820 They are an opportunistic group, so Vokovia was a good deal. 436 00:30:43,340 --> 00:30:46,820 It's quite conceivable they'd come and say, let's go buy Vokovia. 437 00:30:47,200 --> 00:30:48,540 Or even AIG, right? 438 00:30:48,740 --> 00:30:49,880 Or even AIG. 439 00:30:50,500 --> 00:30:55,840 This is the most inside that information gets. This was information from a board 440 00:30:55,840 --> 00:31:02,280 meeting. There were moments when we were, I guess, flabbergasted. 441 00:31:02,750 --> 00:31:09,210 that the breadth of this web extended to so many 442 00:31:09,210 --> 00:31:10,370 high -level executives. 443 00:31:12,390 --> 00:31:17,770 Six weeks later, Lehman Brothers has gone bankrupt, and the big banks are all 444 00:31:17,770 --> 00:31:19,110 fighting for survival. 445 00:31:19,510 --> 00:31:24,510 But Goldman Sachs has a lifeline. The company is in top -secret negotiations 446 00:31:24,510 --> 00:31:28,150 with Warren Buffett to invest $5 billion. 447 00:31:29,150 --> 00:31:30,830 The news is unexpected. 448 00:31:31,680 --> 00:31:34,220 and will mean a certain boost to the stock. 449 00:31:34,560 --> 00:31:38,660 So the fact that Warren Buffett is going to come in with $5 billion at the 450 00:31:38,660 --> 00:31:40,700 depths of the crisis is huge. 451 00:31:40,920 --> 00:31:44,360 And Rajaratnam has just golden information that he can trade on. 452 00:31:45,680 --> 00:31:51,840 On September 23rd, Gupta and the other board members meet by a teleconference 453 00:31:51,840 --> 00:31:52,900 approve the deal. 454 00:31:53,260 --> 00:31:58,900 The government alleges that seconds after hanging up from the call, Gupta 455 00:31:58,900 --> 00:32:00,700 Rajaratnam on his office line. 456 00:32:01,320 --> 00:32:03,240 A line that is not tapped. 457 00:32:03,840 --> 00:32:10,540 As soon as they got off the phone, at 3 .58, Rajaratnam put in a trade order to 458 00:32:10,540 --> 00:32:15,460 buy 350 ,000 shares of Goldman Sachs, which was worth $43 million. 459 00:32:16,800 --> 00:32:21,360 And that was two minutes before the market closed. That's why they were 460 00:32:21,360 --> 00:32:24,360 so much. They had only a few minutes to get this done. 461 00:32:24,840 --> 00:32:29,040 Shares of Goldman Sachs this morning, sharply higher, actually. When the deal 462 00:32:29,040 --> 00:32:35,880 announced the next day, Rajaratnam sells his stock, making a quick $840 ,000. 463 00:32:36,860 --> 00:32:38,380 So, big drama yesterday. 464 00:32:38,780 --> 00:32:40,300 Yeah, I heard. 465 00:32:40,960 --> 00:32:42,820 You mean the last three minutes of the day? 466 00:32:43,300 --> 00:32:45,940 No, I got a call at 3 .58, right? 467 00:32:46,400 --> 00:32:48,600 Saying something good might happen to Goldman. 468 00:32:50,220 --> 00:32:55,880 And just like clockwork, one month later, Gupta dials Raja Ratnam again, 469 00:32:55,880 --> 00:32:57,980 seconds after the Goldman board call. 470 00:32:58,540 --> 00:33:00,780 The news this month is startling. 471 00:33:01,200 --> 00:33:05,460 Goldman Sachs is going to post its first quarterly loss ever. 472 00:33:06,060 --> 00:33:10,760 I heard yesterday from somebody who was on the board of Goldman Sachs that they 473 00:33:10,760 --> 00:33:13,100 are going to lose $2 per share. 474 00:33:13,560 --> 00:33:16,200 The street has been making $2 .50. 475 00:33:17,140 --> 00:33:23,500 Really? So what he was telling me was that Goldman, the court is really bad, 476 00:33:23,680 --> 00:33:26,780 so if it gets to 105, I'm going to whack it, you know? 477 00:33:30,780 --> 00:33:34,740 Rajaratnam dumps his holdings, more than 150 ,000 shares. 478 00:33:35,260 --> 00:33:41,320 By selling before the news goes public, Rajaratnam avoids a loss of $3 .8 479 00:33:41,320 --> 00:33:42,320 million. 480 00:33:43,150 --> 00:33:48,010 The whole world was at the edge of collapse, the financial world. And they 481 00:33:48,010 --> 00:33:54,930 so focused on continuing to get the edge that it's as if they 482 00:33:54,930 --> 00:34:01,550 were trying to keep their poker chips at their side of the table 483 00:34:01,550 --> 00:34:04,290 while playing a game on the deck of the Titanic. 484 00:34:04,530 --> 00:34:08,670 The whole ship is going down, and they're still keeping their little 485 00:34:08,670 --> 00:34:09,909 chips in play. 486 00:34:11,790 --> 00:34:17,030 By now, McKinsey consultant Anil Kumar has been funneling information to Raja 487 00:34:17,030 --> 00:34:18,489 Ratnam for two years. 488 00:34:19,110 --> 00:34:24,030 In August of 2008, he's the source of some major news about AMD. 489 00:34:25,110 --> 00:34:30,290 A foreign company has just agreed to a multi -billion dollar cash infusion. 490 00:34:30,690 --> 00:34:31,690 Hey, Raj. 491 00:34:32,210 --> 00:34:36,130 Yeah, hi, Anil. Hi. So yesterday they've shaken hands and said they're going 492 00:34:36,130 --> 00:34:37,130 ahead with the deal. 493 00:34:37,330 --> 00:34:39,690 So I think you can now just buy. 494 00:34:39,989 --> 00:34:41,130 Great. How much are they investing? 495 00:34:42,089 --> 00:34:44,510 They'll probably say they'll put up to $6 to $8 billion. 496 00:34:45,929 --> 00:34:47,730 You think we should start buying it now? Yeah. 497 00:34:48,050 --> 00:34:50,310 I think this stock could go to $10, you know. 498 00:34:50,670 --> 00:34:52,650 But we've got to keep this radio silent. 499 00:34:52,870 --> 00:34:54,889 Oh, please. That is my pleasure. 500 00:34:55,330 --> 00:34:59,710 Not even to your little boyfriends, you know. No, believe me, I don't have any 501 00:34:59,710 --> 00:35:00,710 friends. Okay. 502 00:35:01,649 --> 00:35:04,610 With Chiesi, you knew that there was a little bit of back and forth. 503 00:35:05,350 --> 00:35:09,290 They were competing with each other to some extent. So they're kind of playing 504 00:35:09,290 --> 00:35:13,350 this game a little bit of who can get the best information, who can use it. 505 00:35:14,450 --> 00:35:15,570 So I have their numbers. 506 00:35:16,950 --> 00:35:18,890 AMD? Is it that bad? 507 00:35:19,830 --> 00:35:20,830 1600. 508 00:35:21,290 --> 00:35:23,330 See? Came to the right place to get that information. 509 00:35:24,290 --> 00:35:25,990 Tell me I'm the best in AMD now. 510 00:35:26,470 --> 00:35:30,490 There? I know. Look, I never say you're not the best. It's hard to compete with 511 00:35:30,490 --> 00:35:32,030 you, but one day I will surpass you. 512 00:35:32,630 --> 00:35:33,650 This is AMD. 513 00:35:33,970 --> 00:35:36,890 IBM, I can't crack. I must defer to you on IBM. 514 00:35:37,970 --> 00:35:39,190 And Akamai, too. 515 00:35:39,790 --> 00:35:42,610 Akamai, too. But AMD, bring it on, baby. 516 00:35:44,190 --> 00:35:45,830 The wiretaps are devastating. 517 00:35:46,210 --> 00:35:53,080 They show Rajaratnam as someone who is just... constantly working people and 518 00:35:53,080 --> 00:35:58,180 bringing in as much information as he could and not thinking at all about the 519 00:35:58,180 --> 00:35:59,180 law. 520 00:35:59,400 --> 00:36:04,220 In the end, agents record more than 2 ,400 phone conversations. 521 00:36:04,640 --> 00:36:10,200 The calls reveal a tangled web of sources, creating the largest case of 522 00:36:10,200 --> 00:36:11,420 trading ever. 523 00:36:11,840 --> 00:36:18,420 I think he felt a sense of power, that he had access to information that no one 524 00:36:18,420 --> 00:36:19,259 else had. 525 00:36:19,260 --> 00:36:22,900 and that he was able to profit by it. It's kind of like taking a bite out of 526 00:36:22,900 --> 00:36:26,340 forbidden fruit, except for here he was feasting on the forbidden fruit. 527 00:36:27,580 --> 00:36:32,540 When American Greed returns, the game is up for Raja Ratnam. 528 00:36:33,000 --> 00:36:35,980 How can you deny something that you put on your e -mail or your text? 529 00:36:36,360 --> 00:36:40,180 And it piles up and up, and it makes a big pile that will bury you and put you 530 00:36:40,180 --> 00:36:41,180 in a federal penitentiary. 531 00:36:47,370 --> 00:36:50,950 By 2009, Raja Ratnam is back on top. 532 00:36:51,170 --> 00:36:54,170 He has weathered the depths of the financial crisis. 533 00:36:54,470 --> 00:36:58,710 And Forbes magazine names him one of the richest people in the world, with a net 534 00:36:58,710 --> 00:37:00,950 worth of $1 .5 billion. 535 00:37:01,690 --> 00:37:06,350 But behind the scenes, federal agents have been investigating Raja Ratnam for 536 00:37:06,350 --> 00:37:07,350 two and a half years. 537 00:37:09,260 --> 00:37:15,420 On October 16th, FBI agents descend on Rajaratnam's home, cuff him, and charge 538 00:37:15,420 --> 00:37:18,840 him with 14 counts of conspiracy and securities fraud. 539 00:37:20,160 --> 00:37:23,340 The arrest sends shockwaves through the markets. 540 00:37:24,060 --> 00:37:28,080 Federal officials today announced what they call the biggest hedge fund insider 541 00:37:28,080 --> 00:37:32,540 trading case in history, and they warned Wall Street to learn a lesson from it. 542 00:37:33,760 --> 00:37:38,040 Rajaratnam is released on a $100 million bond. 543 00:37:38,510 --> 00:37:43,030 As he awaits trial, the government arrests and prosecutes more than three 544 00:37:43,030 --> 00:37:49,110 individuals caught up in the dragnet. Among them, Anil Kumar and Rajiv Goel, 545 00:37:49,110 --> 00:37:53,630 become cooperating witnesses and agree to testify against their friend. 546 00:37:54,510 --> 00:37:57,630 Danielle Chiesi, however, refuses to cooperate. 547 00:37:58,230 --> 00:38:02,390 And in the end, she had a code of honor, which was that she didn't turn anyone 548 00:38:02,390 --> 00:38:03,189 else in. 549 00:38:03,190 --> 00:38:04,950 There were others who were... 550 00:38:05,280 --> 00:38:08,860 perfectly willing to turn on their former colleagues once they were in 551 00:38:09,740 --> 00:38:15,240 GAC pleads guilty, and on July 20, 2011, she is sentenced to two and a half 552 00:38:15,240 --> 00:38:16,320 years in prison. 553 00:38:17,200 --> 00:38:20,320 How do you mentally prepare yourself to be able to go to prison? 554 00:38:20,640 --> 00:38:24,060 Absolutely. What do you anticipate? 555 00:38:24,540 --> 00:38:25,980 I anticipate to survive. 556 00:38:27,300 --> 00:38:28,480 How will you do that? 557 00:38:28,740 --> 00:38:29,960 By surviving, breathing. 558 00:38:31,370 --> 00:38:35,170 Her mood was bizarre, and she seemed to revel in the attention. 559 00:38:35,570 --> 00:38:37,830 She was posing for the camera. 560 00:38:38,410 --> 00:38:41,550 And I told the FBI, if they're ever going to knock on my door again, do it 561 00:38:41,550 --> 00:38:42,550 the afternoon. 562 00:38:44,950 --> 00:38:49,770 Despite the mountain of evidence against him, Roger Rottenham wants his day in 563 00:38:49,770 --> 00:38:50,770 court. 564 00:38:51,570 --> 00:38:54,170 The trial begins on March 8th in Lower Manhattan. 565 00:38:55,990 --> 00:38:59,590 The cornerstone of the government's case is the wiretap evidence. 566 00:39:00,790 --> 00:39:06,250 Prosecutors play more than 40 tapes, Raja Ratnam's own voice echoing through 567 00:39:06,250 --> 00:39:07,250 courtroom. 568 00:39:10,270 --> 00:39:17,270 Everybody was rapt attention when those tapes were played. 569 00:39:17,730 --> 00:39:21,070 It really brought you inside in a way that we'd never been brought inside 570 00:39:21,070 --> 00:39:22,070 before. 571 00:39:22,830 --> 00:39:25,570 The government's key witness is Anil Kumar. 572 00:39:26,190 --> 00:39:31,090 who tells the jury how Rajaratnam paid him more than $2 million in exchange for 573 00:39:31,090 --> 00:39:32,090 information. 574 00:39:32,510 --> 00:39:37,710 Rajaratnam was looking at Kumar with what I thought was undisguised contempt. 575 00:39:38,230 --> 00:39:44,410 And this was a rare tell from Rajaratnam, who was implacable 576 00:39:44,410 --> 00:39:47,710 trial, gave away nothing, and never spoke. 577 00:39:48,830 --> 00:39:53,150 But when Kumar, when his old friend Kumar was up there, I felt that he hated 578 00:39:53,150 --> 00:39:54,150 him. 579 00:39:55,280 --> 00:39:58,240 The defense argues that it wasn't insider information. 580 00:39:58,700 --> 00:40:03,640 Instead, it was painstaking, diligent research that drove Roger Rotnam's 581 00:40:03,640 --> 00:40:04,640 investment decisions. 582 00:40:05,260 --> 00:40:09,380 The bottom line is, even the world's greatest attorney can't save you if 583 00:40:09,380 --> 00:40:15,880 caught red -handed in e -mail, in text messages, on audio tape with phone 584 00:40:15,960 --> 00:40:20,380 phone records. When the government brings in evidence by the truckload, 585 00:40:20,380 --> 00:40:21,820 going to bury you under that evidence. 586 00:40:23,880 --> 00:40:27,720 The jury deliberates for 12 days and then returns a verdict. 587 00:40:28,320 --> 00:40:30,300 Guilty on all counts. 588 00:40:30,980 --> 00:40:37,720 On October 13, 2011, Raja Ratnam is sentenced to 11 years in prison and 589 00:40:37,720 --> 00:40:40,540 to forfeit $63 .8 million. 590 00:40:41,260 --> 00:40:45,160 It's the longest sentence for an insider trading case ever. 591 00:40:46,000 --> 00:40:49,040 But the worst isn't over yet for Raja Ratnam. 592 00:40:49,360 --> 00:40:55,300 A judge orders Rajaratnam to pay $92 .8 million to settle the civil case. 593 00:40:55,760 --> 00:40:59,320 The message to Wall Street is very loud, it's very clear. 594 00:40:59,560 --> 00:41:00,700 Be afraid. 595 00:41:01,000 --> 00:41:02,100 Be very afraid. 596 00:41:02,840 --> 00:41:07,880 And for months, it appeared that Rajat Gupta, the most prominent member of 597 00:41:07,880 --> 00:41:10,700 Rajaratnam's circle, might not be charged. 598 00:41:11,160 --> 00:41:17,540 But on October 26, 2011... Gupta is charged with five counts of fraud and 599 00:41:17,540 --> 00:41:19,620 count of conspiracy to commit fraud. 600 00:41:19,860 --> 00:41:25,620 Gupta has pleaded not guilty and his attorneys say he never engaged in 601 00:41:25,620 --> 00:41:26,620 trading. 602 00:41:26,900 --> 00:41:30,160 He is expected to go to trial in 2012. 603 00:41:31,400 --> 00:41:36,720 So Mr. Gupta is at an enormous disadvantage because one jury of his 604 00:41:36,720 --> 00:41:40,960 already decided that this was enough to put his colleague Raj behind bars for an 605 00:41:40,960 --> 00:41:44,180 extended period of time. So he's in a very, very deep hole. 606 00:41:45,760 --> 00:41:50,980 Raj Rajaratnam once had it all. He was an immigrant who fought his way to the 607 00:41:50,980 --> 00:41:53,960 top and became one of the richest men in the world. 608 00:41:54,500 --> 00:41:57,900 But his own greed ultimately was his undoing. 609 00:41:58,960 --> 00:42:00,660 99 % of what Galleon did? 610 00:42:01,260 --> 00:42:05,400 It was entirely legitimate, driven by very good analysts and very good 611 00:42:06,300 --> 00:42:10,100 I don't see why Raj did what he did. It just seemed totally unnecessary. 612 00:42:11,300 --> 00:42:16,320 Raj seems to be someone who could have made a fortune, made many fortunes, 613 00:42:16,320 --> 00:42:20,980 without breaking the law. He was extremely smart and knowledgeable and 614 00:42:20,980 --> 00:42:21,980 hardworking. 615 00:42:23,320 --> 00:42:26,000 But there seemed to be... 616 00:42:27,070 --> 00:42:30,570 bigger challenge and a bigger thrill in getting information that other people 617 00:42:30,570 --> 00:42:31,570 couldn't get. 618 00:42:32,050 --> 00:42:37,330 It was about being a multi -billionaire, having $7 billion under management. 619 00:42:37,730 --> 00:42:42,750 Whether that was just pure, unadulterated greed that he was after or 620 00:42:42,750 --> 00:42:45,130 was just the conquest, we may never know. 621 00:42:45,670 --> 00:42:50,570 But he wanted the money, and he got the money, no matter what shortcuts he took 622 00:42:50,570 --> 00:42:51,570 to get it.