By Michelle Celarier
The conviction of Galleon Group founder Raj Rajaratnam on fraud and conspiracy charges related to insider trading came as no surprise to anyone in the hedge fund world—except perhaps Rajaratnam, who seemed to believe until the end that the rules did not apply to him. Captured by law enforcement’s best tool—wiretaps—the shocking admissions of illegal activity by Rajaratnam and numerous other hedge fund traders and portfolio managers who’ve pleaded guilty show just how pervasive breaking the law has become among a certain group of people in society—and I’m not just talking about those in the hedge fund world.
One wants to think that most do play by the rules; it’s always dispiriting to find a manager you’ve respected alleged to be a criminal. At AR, we’ve written glowing profiles about a few—including Sam Barai of Barai Capital and Chip Skowron of FrontPoint—now charged with insider trading.
The investigation into Galleon et al. began before the financial crisis almost brought the world to its knees. Not one of the implicated financiers—not even Lehman Brothers’ Dick Fuld—has been indicted for his crimes against capitalism.
Now we can add to the likes of hedge fund managers and Wall Street bankers two more powerful, wealthy men whose bad behavior reeks of the privilege to which they seem to feel entitled: Arnold Schwarzenegger and Dominique Strauss-Kahn. The former governor of California is not accused of a crime (although there are reports of sexual harassment in his movie days). The rape allegations against Strauss-Kahn are especially disturbing, since the International Monetary Fund he headed until recently is outside the reach of the law in the country where it is headquartered.
The debate in psychological circles is whether wealth and power lead a few men to think themselves above the law, or whether personality characteristics—OK, a sociopathic personality—also lead to their greatness. The latter explanation seems to be gaining currency.
And we do seem to be talking about men here. At this writing, France’s finance minister, Christine Lagarde, is the frontrunner for Strauss-Kahn’s job at the IMF, leading even some men to say that having a woman in charge would, fortunately, mean that rape would no longer be on the agenda.
There is probably no industry in the world with fewer women at the top than hedge funds—one is hard pressed to find a multibillion-dollar hedge fund firm founded by an individual woman. I don’t like to make gender generalizations. Perhaps these are crimes of opportunity and if women were running more hedge funds, you’d find just as many female criminals as male ones. However, studies have shown women to be more responsible managing and investing money than the male of the species. Maybe it’s time for institutional investors to seek them out.
