New sheriff of Wall St. is racking up insider trading convictions
This time the top federal prosecutor in Manhattan nabbed a top portfolio manager at one of America's biggest hedge funds. SAC Capital Advisors' Michael Steinberg was led out of his Park Avenue apartment building in handcuffs early Friday morning. It's a major arrest at a fund that has long drawn government scrutiny.
Bharara, 44, has carved out a reputation for being a tough prosecutor who has overseen some of the most high-profile white-collar criminal cases since the 1980s. His quest to bring Wall Street wrongdoers to justice has claimed 71 insider trading convictions since taking office three years ago.
He's an unlikely standard bearer in a role once held by bigger-than-life characters such as Rudy Giuliani and Eliot Spitzer.
The latest chief Wall Street scourge is a soft-spoken native of India who grew up in the suburbs of New Jersey. He says he has an indulgence for listening to Bruce Springsteen, and that he wanted to become a lawyer after reading "To Kill a Mockingbird" as a teenager.
"I'm like a lot of Americans. I care about the underdog," Bharara told The Times in an interview. "You want to make sure you're fighting for them. It's a long American tradition."
His latest push appears to center around SAC Capital, run by billionaire investor Steven A. Cohen.
Bharara's office has brought charges against two of Cohen's portfolio managers. In addition to Steinberg, Bharara filed charges in November against Mathew Martoma, a former portfolio manager at a SAC Capital affiliate, CR Intrinsic Investors. Martoma's case involved trading stock of two pharmaceutical companies that were developing a drug to treat Alzheimer's disease.
Steinberg's case involved trades in computer giant Dell. Barry Berke, Steinberg's attorney, said his client "did absolutely nothing wrong."
Both portfolio managers have pleaded not guilty.
"This is another rung in the ladder to get to who they really want," said Ernest Badway, a formerSecurities and Exchange Commission enforcement attorney now in private practice. "It's obvious to even a casual legal observer that Bharara and his prosecutors are building a case against Steve Cohen — or at least attempting to. Whether they'll be successful is a different story."
Cohen has not been accused of wrongdoing. His spokesman has repeatedly said Cohen has always acted appropriately. Since August 2009, Bharara's office has charged 81 defendants on Wall Street and corporate America with insider trading.
As the head of the U.S. Attorney's Office in the southern district of New York, Bharara oversees more than 230 prosecutors. Major cases have targeted mobsters, weapons smugglers, terrorists and Somali pirates. In one instance, prosecutors even helped return a looted dinosaur skeleton to Mongolia.
Before the cases involving SAC Capital employees, Bharara's biggest insider trading busts were against Raj Rajaratnam and Rajat Gupta. As head of the Galleon Group hedge fund, Rajaratnam had created a sprawling insider-trading network. Gupta, a former director of Goldman Sachs and head of the consulting group McKinsey & Co., fed company information to Rajaratnam.
Gupta was sentenced in October to two years in prison and is out on appeal. Rajaratnam is serving an 11-year prison sentence.
Bharara declared the prosecutions a "wakeup call for Wall Street."
It won him respect in both Washington and in the financial community, and even from some of his predecessors.
"If any federal prosecutor has been in the forefront, it has been Preet," said Spitzer, who held the unofficial mantle of "Sheriff of Wall Street" when he was New York's attorney general. "I give Preet very high marks for doing what he's trying to do and leading that effort."
Bharara's pursuit of Wall Street wrongdoers has even gotten a nod from Springsteen, who last year gave the prosecutor a shout-out during a concert in Hartford, Conn.
"This is for Preet Bharara!" Springsteen boomed before launching into "Death to My Hometown," a protest song aimed at Wall Street.
Bharara, who was at the concert with his family, recalls being surprised by hearing his name being screamed out by his musical idol. But he does understand the populist outrage that began building since the financial crisis.
"You find it outrageous that people in the financial world who have so much privilege and so much education and so much going for them … decide they are going to throw out everything that they learned and throw out all ethics to make a few extra dollars," Bharara said.
Still, Bharara has his critics.
Some attorneys question whether his crackdown on insider trading has been too aggressive, and has possibly overlooked other corporate crimes on par with Enron's accounting fraud. Others fault him for not sending high-ranking Wall Street executives to prison for their role in the financial crisis.
William Black, a professor of economics and law at the University of Missouri-Kansas City, said he is disappointed with Bharara: "Even our most successful prosecutor of elite white-collar criminals has been absolutely unable or unwilling, or both, to take on the real heavy hitters on Wall Street who caused the crisis."
Although Bharara may be relatively unknown outside of New York, many in the Indian-American community have kept tabs on him as an up-and-comer. They put him in the same league as Indian-Americans like Bobby Jindal, governor of Louisiana, and Nikki Haley, governor of South Carolina.
"He's a real rock star, not just with the younger generation but even the older generation," said Aziz Haniffa, a top editor of India Abroad, a weekly newspaper aimed at immigrants from the subcontinent. "A lot of them are really proud of this guy."
Bharara was born in 1968 to a Sikh father and Hindu mother in India's Punjab province near the Pakistani border. He was 2 when his family moved to London so his father could complete his medical training. His father eventually landed a job at a New Jersey hospital and later set up a pediatric practice in Asbury Park.
His parents hoped Bharara would go into medicine, but he was more interested in writing and public speaking. He edited the high school paper and led the speech team.
After studying political science at Harvard and then law at Columbia, he worked at corporate firms in New York until 2000, when he joined the U.S. attorney's office in Washington. Then in 2009, President Obama asked him to return to Manhattan to head the U.S. Attorney's Office.
The work consumes Bharara, who lives in the New York suburbs with his wife and three children.
There has also been talk that he might be destined for higher office.
Giuliani and Mary Jo White both headed the U.S. Attorney's Office in Manhattan. Giuliani went on to serve as New York City mayor and ran for president in 2008. White became a white-collar crime defense lawyer and is on tap to lead the U.S. Securities and Exchange Commission.
Voters sent Spitzer and Andrew Cuomo, New York state attorneys general who took on Wall Street, to the governor's mansion.
Bharara, whose government salary is about $150,000 a year, deflects questions about his future. He says he has no desire to run for public office, and believes he already has his dream job.
And it's apparent he relishes what he does for a living.
Sometimes his own flash of wit shows up when he speaks before industry groups and business schools. Addressing an investment industry group, he apologized for not bringing enough subpoenas for everyone.
"Obviously, I'm kidding," he quickly added as the laughter died down. "I do have enough."
andrew.tangel@latimes.com
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