Galleon Hedge Fund Scandal: The Cursing, The Paranoia And $4 Million For Kenny Rogers On Auto-Repeat

Research assistance by Claire Schneiderman

The story of Galleon Group, the hedge fund at the heart of the biggest insider-trading scandal in decades, has plenty of colorful characters from a billionaire whose charitable donations ended up aiding rebels in Sri Lanka to a foul-mouthed ex-Bear Stearns executive who befriended a mild-mannered IBM vice president.

Here's a guide to the scandal's most colorful quotes and anecdotes:

- Leon Shaulov, a loudmouth senior trader at Galleon, once turned on a colleague, Gary Rosenbach, in front of the rest of the staff, screaming: "You're a disease, you're a jinx."

- Galleon founder Raj Rajaratnam once "paid $4 million to have Kenny Rogers come to a birthday party at his house and sing his favorite song, 'The Gambler,' over and over again. Kenny refused to go on after a dozen times."

- Anyone who arrived late at Galleon's morning meeting of 70 analysts, portfolio managers and traders was fined $25.

Straight from the indictment of co-defendants Danielle Chiesi and Mark Kurland, both from the hedge fund New Castle, and Robert Moffat, the IBM officer who provided them with information regarding AMD, IBC, and Sun Microsystems, come some incredibly insightful quotes caught on government wiretaps:

- Chiesi to Kurland, on whether to call an Akamai executive when they believed Akamai would announce quarterly earnings earlier than expected, "Do you want me to call [the Akamai Executive] up? It's a pretty fucking scary thing to do." Kurland replied, "Call him... Let him talk."

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- Following this conversation, an Akamai executive called Chiesi to say that he was "gonna come visit you in New York and I'm gonna give you a present. But it has to be face to face..." Later, he said, "Danielle, I have a major present for you." Chiesi asked what he was talking about, and the Akamai executive replied, "Information." Chiesi said, "Well that, that is a great present."

- Perhaps Chiesi knew that she would be indicted in the first case of insider trading where the feds used wiretapping. When Kurland called Chiesi at the end of August, 2008, Chiesi said that she was going to "get a new cell phone and talk to [the AMD executive from there... I know I'm paranoid." Kurland replied, "Alright, well don't keep talking about it on the phone. I'll take care of it alright."

- Regarding whether Chiesi and Rajaratnam would have bought AMD stock if they weren't in on the trading, Chiesi asked, "If the two of us weren't close to the company as we are, would you be long the stock?" Rajaratnam replied, "Yeah, no. I wouldn't." Chiesi said that she "wouldn't of touch[ed] it with a fucking 10-foot pole."

- In what seems a clear sign that Rajaratnam and Chiesi were aware of potential wrongdoing, during a discussion of AMD stock, which both of them were buying, Chiesi said: "I don't want anybody else to make money on this but us, 'cuz I don't want to get in trouble for a lot of reasons..."

- A conversation between Chiesi and a co-conspirator was even more telling: the co-conspirator asked when the announcement would take place regarding an AMD reorganization, Chiesi replied, "September... I swear to you in front of God... You put me in jail if you talk." Later, Chiesi said, "I'm dead if this leaks. I really am... and my career is over. I'll be like Martha fucking Stewart."

Comments

[Rapier]

Remember the genius traders of the early eighties, Ivan Boesky, Michael Milken et al, who also went to jail ... especially Boesky's gall in offering investment advice when his main play was insider trading.

[landoffreee]

For a more perfect unions we must have:

Jobs,job securi.ty, job benefits, universal pre school-K.1­2, housing, affordable college education affordable health are that doesn't ban.krupt sic.k families

good articles; http://ow.ly/dmzm

a better society is one that creates opportunity & while providing safety nets and welfare programs for disadvantaged

[GerryS]

yo, Raj. have a thin mint, just one thin mint--------------

[msjimmied]

Guess which judge they assigned this case to? Judge Rakoff...t­hink back to Bank of America and the 33 million fine..

http://www.zerohedge.com/article/after-making-public-ridicule-showcase-sec-judge-rakoff-set-sights-rajaratnam

[DFawcett]

Interesting that I tried to post an article critical of Huffington Post for writing that money ended up aiding terrorists when that has not been proven, but the note was spiked. So much for a free and open message board.

[cartunes]

They took a course from the Obama propaganda machine who learned there skills from Mao, Castro, Stalin, etc.

[martykz]

Like most conservatives, cartunes, you are a semi-literate boor not knowing the difference between there, their, and dare I say, they're.

[alanposting]

...they have censored my comments many times.....­.

[cartunes]

Maybe, just maybe we can catch some more at Obama's next fund raiser since it's going to have lots of wall street people at 15'000 a plate.

[ObliqueReference]

Funny, he loved the song but the message never got through.
"You gotta know when to hold 'um, KNOW WHEN TO FOLD 'UM."
You'd think after 12 times he would have grasped the wisdom of his favorite song.

[FoonTheElder]

They only hear the parts they want to hear and ignore the rest.

Don't forget to put on the foil, Jacques Plante!

[LemonGrass2]

but what I want to know is, did he still get his 4 Mil even though he refused to go on a 12th time? Prolly not. Or not without a fight, that is!

[den1953]

For all the inside trading that goes on there why stop at one guy bring the bus!

[endlessirony]

This guy is just fodder so they can point out and say see we do prosecute wall street, the Bernie Maddoffs of the world will still be operating without scrutiny because they know people in the SEC and are virtually untouchable. You can simply look up Harry Markopolos testimony to congress this is a sad joke.

[Supercruize]

The SEC screws up on a $64 Billion ponzi scheme but get some guys on a $20 million insider trading racket. I dont know who to trust in this case. PT

[picaman]

Or you could say the SEC under a Republican led administration overlooks a 64B ponzi scheme while under a Dem administration catches a 20M racket.

[martykz]

A Ponzi scheme is simple theft, larceny writ large. Insider trading, however, undermines and corrupts what we (including conservatives) hold most dear, that is the free, fair and balanced system of markets.

Now that you actually know something, you know how it feels to be a liberal.

[DFawcett]

I am in awe of the power of the government. An arrest, some well placed leaks to the press about information obtained using wiretaps, leak some more about a terrorist link and then put the cherry on top with a bizzare Kenny Rogers story to paint a picture of greed and excess. Obviously guilty, no need for a trial. Shouldn't we demand that our law enforcement officials make their case in a court room, rather than the media. Oh yeah, but then how would careers be made.

[martykz]

You're right, DFawcett. These details should be kept secret so we can complain that the Obama administration is lying about being transparent.

[Soulsurfer]

This is how the elites make their money. Hard work, integrity, etc.

[RRoadrunner]

A billion dollars and feels the need to cheat?

[Rapier]

That's how he got he billion dollars.

[djwfutbol]

Poor Kenny Rogers. He doesn't deserve the abuse he takes. I once had Sunday brunch with him and his wife in NY. He was dressed for church, the rest of the upper West siders looked like something the cat drug in. A babe in the woods, as it were.

[Pierpier]

you should read the articles Bloomberg is posting about this story. It's a quite a big scandal and will possibly lead to more arrests. The basic problem has been focused correctly for the first time: traders manipulate information and forecasts in conjuction with media, other operators, investors.
It is now many years that we see unsupported opinions and forecasts affecting the stocks, with enormous benefits to some. It is a step ahead of the "traditional" view about insider trading.