Raj Rajaratnam: From Role Model to A Bad Example

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It was the year 2008.  I went through Forbes’ “The 400 Richest Americans” list and read about each billionaire.  One name that intrigued me and stood out on the list was that of Raj Rajaratnam, an investment manager from New York.  His net worth was estimated to be 1.8 billion and ranked 262 on the list.  Rajaratnam is a common Tamil name and I have relatives by the same surname.  I started looking up more information.

I have been a small time retail investor fascinated by the intellectual challenge of investing.  Being a student of the market  exhilarated and humbled me.  It was not surprising that I was interested in learning more about Raj Rajaratnam.  It turned out Rajaratnam and I shared many things in common.  He is a Tamil from Sri Lanka like me.  He left Sri Lanka at a young age and got his education in the West like me.

Rajaratnam worked as an investment analyst before starting out on his own.  He started a hedge fund called Galleon Group that focused on the technology and health care sector.  His flagship product, Diversified Fund, had an annualized return of more than 22% in 2009.  He was considered one of the star hedge fund managers who survived and succeeded in the shark-eat-shark world of Wall Street.  He contributed to various causes and charities including to people affected by the tsunami in Sri Lanka.  His story was an inspirational, feel-good rags-to-riches story.  Soon he became my invisible role model along with Warren Buffet and Steve Jobs.  I was terribly proud of him.  I did not know why.  Maybe because of our common heritage, I thought.

I read whatever that appeared on newspapers about Rajaratnam.  For me, he epitomized the success of an immigrant and the industriousness of Tamils.  He did not become a billionaire due to political connection or inheritance.  He got there through education, diligence and hard work.  His flagship fund’s return of 22% beat the market by a high margin and performed much better than the average hedge fund.  His fund’s high performance intrigued me.  I wondered what his secret ingredient was.

It turned out that one of his secret ingredients was insider trading.  Insider trading is a faceless crime.  You buy and sell company stocks based on information that is not available to the public.   It affects millions of people – from a single mother who saves and invests money for her child’s education to the worker who toiled on the factory floors for 40 years and sees his retirement disappear.  It is an unfair game where the information privileged have an edge.  Insider trading makes people lose faith in capitalism in general and stock market in particular.

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Rajaratnam had been charged with insider trading and sentenced to 11 years in prison.   He was asked to cooperate with the government to pin point other successful South Asians involved in the insider trading for a lesser sentence.  However, he did not.   In an interview with Newsweek , he explained his defiance to his upbringing as a minority Tamil in Sri Lanka and his journey as a dark-skinned immigrant through rich countries.   Overall, he had accepted that the American justice system was fair.  Rajaratnam was not the first one to be convicted of insider trading.  There were many before him and there will be many after him.  And there are many who still trade on non-public information shared at golf courses or through expert networks.  Many of them go undetected.   Sure, Rajaratnam was my distant role model at one point but not any longer.  He set a bad example for me and everyone else to follow.

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Ron

Ron

Living in a truly international city called Toronto. My interests are mostly economics, investment, the world and its people. In my spare time, I read, think, travel and workout.

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16 thoughts on “Raj Rajaratnam: From Role Model to A Bad Example

  1. He is only got caught, there are bigger fishes out there that still not caught. I am sure of it, this is how finance and politics works.

  2. Rajaratnma also donated a huge amount of money for schools and orphanages and that is one of the reasons that his sentenced was lowered.  You could have included this information since no one is black or white.  We are all gray.

  3. ““For years these guys were sitting around in sports clubs and exchanging information. That wasn’t a crime. And now we immigrants do the same thing and it is?””

    As late as two weeks before the sentencing, Rajaratnam was still being asked by the government to turn on Gupta. But he wouldn’t wear a wire, he says, so he could sleep at night. “Anil Kumar’s son worked at Galleon one summer. I used to vacation with Rajiv Goel’s family. Their families knew my family. You don’t think this is going to haunt these guys? They wanted me to plea-bargain. They want to get Rajat. I am not going to do what people did to me. Rajat has four daughters.””

    http://www.newsweek.com/exclusive-raj-rajaratnam-reveals-why-he-didnt-take-plea-68203

  4. This man is a true rags-to-riches-to-rags story, a reverse Horatio Alger, a true Shakespearean tragedy, The Weasel of Wall Street. He undermined the very system that gave him opportunity and for that he is a disgrace.
    One thing I wonder is whether Tamils are capable of building a developed country on our own. It seems that Tamils are capable of thriving in an advanced country already built by others (the West by Europeans, Singapore/Malaysia by Chinese). Yet can we build an advanced free and fair First World society on our own? If not why not?
    Look at the countries Tamils flee to – Canada/US/Australia – built out of nothing from backwater wilderness to First World nations. It was for the most part white Anglo-Saxon Protestants that laid the foundations and institutions – who built this country out of nothing into what are today orderly, diverse and prosperous countries.
    So what is it that makes WASPs unique? WASPs don’t have strong ties to extended families. They don’t really see themselves as belonging to an “ethnic group.” They are not clannish, nor do they feel a sense of “group solidarity” to a subgroup – clan/caste/village etc. Their ties are to the nation-state foremost. As such, they have a greater sense of civic duty, civic responsibility, civic mindedness and civic activism. 
    Moreover they value structure, order, cleanliness, punctuality. For the most part they respect the rule of law and like neat suburbs and a trimmed green lawn. They are usually civil, fair, rational, practical people, not prone to dogma or superstition.
    These values allow for a free, fair, advanced egalitarian society to develop. I think the WASP ethos is admirable, and so too does much of the world. The overwhelming tide of humanity including Tamils is migrating to WASP and WASP-derivative nations.
    So if the overwhelming mass of humanity would immigrate to these five nations if given the choice, is this not an indictment of cultural relativism, and implicit admission of the superiority of Anglo values and societies?
    Tamils in many ways are the anti-WASPs – clannish, dogmatic, disorderly, superstitious, petty, often deceitful and dishonest and lack civic-mindedness (though the younger Westernized generation is much better in this regard). These qualities will never allow for an advanced First World country to develop. The people need to develop before the society and country can develop.
    If Tamils have not built a First World society anywhere on our own, then perhaps there is something fundamentally bankrupt with Tamil culture and values. Perhaps there is a need for reform, and perhaps Raj Rajaratnam is the perfect poster boy for this?

  5. Yeah sadly the truth is that if u don’t get caught u r a role model BUT if u get caught then u r a bad example.

  6. Pandit I truly believe you don’t know nothing about Tamil History why they lead in in few countries.
    Tamil truly one of the most advance culture from economy to industrial. Look at Tamil Nadu second richest state in India and with no water and partly controls bollyowood.
    Look at Sri Lanka, before genocide started, Tamil owned 80 percent businesses in Colombo, now you obviously know how the percentage mightn’t look like.

    Where anyone built from scratch or not doesn’t matter. What’s Tamil is good at, is adaptable, that’s why you see Tamil is striving everywhere. I’m not sure if you are Anti Tamil and trying to bring some words here and there.
    Tamil were the center in Sri Lanka like Jews in Germany, and genocide exist to trap that from growing. Anyhow if Tamil succeeds so great-fully everywhere including UK with 5 billion pound per year (look for David Cameron message), why can’t Sinhalese do the same?
    Like my friend said, they are used to getting assisted by Sinhalese government and end up clueless in the west. Look at M.I.A. vs any Sri Lankan rapper. Sad huh?

  7. Well!!! There are lots of lesson to learn from his life such no one fought back, but he did, he decided to plead not guilty regardless of the consequences, he didn’t crumple under pressure, and etc. It is quite funny that he is no longer your role model. He is always a role model, he is a under dog, fighter.

  8. NixonRexzile Pandit Not accurate … 

    Tamils in Sri Lanka were the economic and political elites when Sri Lanka gained independence because the British favoured Tamils. Institutions, such as Universities, were typically much more acessible to the Tamil population. For the British, this was a concious strategy that was repeated across all of their colonies, where they favoured minorities groups… 
    In regards to Tamils doing well in the west, it is again related to the socio-economic status of South Asians and Asians who tend to migrate to the west… That is why, typically, South Asians and Asians tend to do better in the US, Canada and UK. This is just a general statement, obviously the socio-economic status of a lot of Tamils in Toronto is much lower than those who migrated here because of the high skill-sets.

  9. ERamachandran NixonRexzile Pandit First of all, you can’t go back and forth and then claim one thing over another. Yes that’s confusing what I said is what you are doing now. British never favoured Tamil, that’s an old saying. British actually favoured united country when they knew Tamils were discriminated by Sinhalese since 1920. Were Tamil favoured over Sinhalese maybe only because they and man power when it came to global economic, but that didn’t matter for British and gave power to Sinhalese. It’s that simple.
    In regard to why Tamil is success in the west, well you first mentioned how Tamils are not good at doing alone instead depends on west for success, so I replied we at least they can adapt and Sinhalese can’t that’s why you don’t see any successful Sinhala whether be Entertainment or Politics. But I’m not here to talk about competition.
    “One thing I wonder is whether Tamils are capable of building a developed country on our own. It seems that Tamils are capable of thriving in an advanced country already built by others (the West by Europeans, Singapore/Malaysia by Chinese). Yet can we build an advanced free and fair First World society on our own? If not why not?”
    That’s what you posted, not sure what you want to say or try to say, but you can clearly see it yourself, you are only looking for negative.
    Not 3rd garbage country can run fair if genocide exist for the past 63+ years!
    Tamil proves that even if they are labelled as terrorist, they are not threat to the world but to Sri Lankan government.

    It;’s sad Sinhalese reject to care instead of team up and compete against the world. But now they don’t deserve tamil.

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