Confessions of a Wall Street Insider

by Michael Kimelman

  In strolled Judge Holwell, a deliberate, soft-spoken Sam Elliot lookalike, and we were seated.

  He offered a courteous “Good morning” and asked if there were any issues that needed to be discussed without the jury present. When both sides demurred, he instructed the marshal to bring the jury in. After a minute, there was a loud knock at the jury room door and in sauntered Raj’s jury, sixteen of the most motley-looking individuals you’d ever seen. These were not the folks you wanted juggling with your fate. In Hollywood, “wardrobe” dresses Law & Order jurors in generic, dull, business casual clothing that doesn’t stand out. In real life—as anyone who has been in a courtroom can attest—jurors often don’t hesitate to dress like they want to be the center of attention. This jury was no different. They wore everything from neon lime-green Hawaiian shirts to long, disheveled dreads that made them look like the monster from Predator.

  “Can you imagine having your life in the hands of that crew?” Pete whispered, looking them over, having the same thoughts.

  “Can I?” I asked incredulously.

  “Oh yeah. Shit. I forgot.”

  Pete hung his head.

  At the break, Pete and I stood in the hallway, where I pointed some of the players out to him. “That’s Nathanson. He’s one of Galleon’s attorneys from Shearman and Sterling. And that’s Susan Pulliam. She’s a reporter at the Journal.”

  “Who’s the sailor from Nantucket?” Pete asked, referring to a bespoke-dressed man in his forties. He had a double-breasted navy blue sport coat with a white silk pocket square, and looked like an extra in a yacht club’s “Boating Safety” video.

  “Oh, that’s McCarthy,” I said. “Raj’s PR guy.”

  Just then, the door to the stairs was yanked open and FBI Agent B. J. Kang and another agent I didn’t recognize—a burly dude with his brown hair shorn to the scalp—shouted, “MAKE A HOLE!”

  Each had a hand on one of Anil Kumar’s arms, and speed-marched him into the courtroom. Anil’s head stayed lowered. The FBI agents were barking and swiveling their heads, scanning the room for potential threats. The crowd of reporters and spectators parted like the Red Sea, and Anil was pushed into the relative safety of the courtroom. It seemed laughably silly to treat Kumar like a stool pigeon at a mob trial, but I guessed the feds weren’t taking any chances.

  When they were through the courtroom doors, Pete turned to me, an inquisitive smile on his face.

  “Make a hole? Who talks like that? How about ‘Excuse me, please’?”

  “I’m going to use that from now on. When I’m boarding the subway during rush hour, I’m just going to scream at the people in front of me, MAKE A HOLE!”

  We laughed and went back inside.

  Kumar, a longtime friend of Raj, testified competently and did the two things the government needed him to do. One, he made clear that he had been getting illegal information from his employer, Intel, and two, that he had been passing that information along to Raj—who also knew it was illegal. On cross, Dowd made a few minor dents, but did nothing to really damage Kumar’s core testimony.

  From a psychological perspective, the most interesting part wasn’t the trial itself—which provided few surprises and even fewer moments of drama—rather, it was the reaction that Zvi’s presence was beginning to produce in others. His miscarriage tirade had made him a marked man. Everybody looked his way now. You could feel a palpable hatred emanating from the FBI agents in the courtroom, many of whom may have assisted on our case. They all knew the cocky, handsome fool parading around the courtroom with a permanent smirk on his face, awaiting his turn.

  It was almost unheard of for a high profile defendant like Zvi to attend the related trial of another defendant. So much so, that Bloomberg wrote an article on the spectacle Zvi was creating, again referring to him as Octopussy, and including a big photo of him, unshaven and in one of his many loud track suits. Prosecutors and FBI agents alike gave Zvi a wide berth, but their sneers made clear that they considered him nothing more than a common street hoodlum. They were salivating at the prospect of sending him to rot in jail.

  I could hardly blame the Feds for their reaction. I knew Zvi had crossed a line. At the same time, there was still something about the parading of Zvi and Raj around like two financial super criminals that reeked of disinformation and propaganda. And maybe even something else. Here they were, two foreign-looking swarthy gangsters, up against the white-bread boys of Washington. (Preet Bharara was the lone brown face on the government’s side.) The big banks had collectively just lifted somewhere in the order of $1 trillion from America, but nobody there was ever shackled. A few people got slapped on the wrist. That was it. Yet these “ethnic” boys with their strange names had been targeted for financial misdealings that weren’t all that different from what the big banks had done.

  However you looked at it, Raj had not “stolen” millions from anyone, and Zvi had not made a dime from his trades. Their crimes were technical violations. No one lost their life savings (which is more than could be said for the pre-recession machinations of Goldman Sachs, Merrill Lynch, Bank of America and the rest), and no one, ever, was physically hurt. These weren’t con men stealing Social Security pensions from hapless widows a la Madoff. What Raj and Zvi—along with dozens of others in the money management industry—had done was the financial equivalent of jaywalking. They had broken a technical rule that those in the know had been breaking since the turn of the eighteenth century when traders would gather underneath a large Buttonwood tree at the foot of Wall Street to trade securities. Type up any chart of any stock before a takeover or major event, and you can see the movement before the announcement—someone always knows. But it was easier to present Israel Brooklyn and the Dark Man as the bad guys to a hurting American populace hungry for justice, than it would ever be to go after the big banks, or the bought and paid politicians who had changed the rules to make it easier for crony capitalism and power consolidation to take place. It was a PR blitz, designed to show the American public that while the feds had missed Madoff, Stanford, and others stealing billions over the last twenty years, and that mortgage fraud in the trillions had been going on right under their noses for years—the Good Guys were fighting back … and winning!

  To a way of thinking, this trial was Oligarchs 1, Outsiders 0.

  Zvi was an asshole and a bully. Raj was an information junkie and a glutton. These were not “good” men. But neither did they play any role in the financial collapse our country was suffering through, nor were they even remotely the most egregious or high-level insider traders out there. And that being the case, it did lead one to ask why they had really been put on trial.

  I never for a moment forgot that I was caught up in a staged drama.

  The week of our arrest, AUSA Brodsky had told Cynthia, the first of Zvi’s many attorneys, that he had no interest in negotiating separate pleas. “Come in for a global plea and everyone will be in much better shape. Otherwise he’ll spend the next fifteen years in prison. The case against Zvi is airtight.”

  When Zvi relayed the story to me later, he added his own color: “If that’s his definition of airtight, it’s a good thing he’s not a submarine commander—he’d kill his entire crew.”

  The real value in Zvi lay in his ability to string up Raj and Gary Rosenbach. The government knew Zvi could be a devastating cooperator if he’d only turn informant. The standard modus operandi of prosecutors is to extort and coerce a defendant until he’s under unbearable duress. Keep adding new charges and more dollars until the defendant faces the unbearable prospect of bankruptcy and decades in prison, and then flip him and work up the chain.

  According to Brodsky, the deal for Zvi could get pretty sweet. All he had to do was offer up info on Raj, Gary, and, get this … me. Billionaire I, Billionaire II, and a mortgage-saddled nobody. It was strange, but indicative of the phantom nature of their case that they were pressuring Zvi to flip on me downstream, along with those two whales upstream. The mantra typical
ly went, “Work up the ladder, not down.”

  I was way, way down.

  After watching the first week of Raj’s trial, I was having serious doubts that he would be able to win. It looked like they were going to prove that Raj had done what they said he’d done. But Raj still had a strike force of the best lawyers money could buy, and they’d been working on his case 24/7 for the past eighteen months. The entire back row of the courtroom was filled with Raj’s lawyers, and there still weren’t enough seats. His team also occupied the first row of the spectator gallery—paralegals, PR people, and other miscellaneous assistants. Raj was using a large chunk of his billion-dollar fortune for his own version of the Powell Doctrine—if you choose to go to war, go all in with overwhelming force. Think Iraq as opposed to Vietnam. Raj could afford to pursue every investigative avenue and every litigation tactic out there. I, on the other hand, couldn’t afford any investigative work. Neither could I afford jury selection consultants or trial strategy focus groups. I couldn’t even mount the proper and necessary pre-trial motions because of my financial limitations. But even with this “one hand behind my back” reality, I knew I had to fight. I was innocent.

  Sommer still believed there was a chance that the government would blink and offer me something. Unfortunately, this was based largely on his analysis of Zvi and Nu as rational actors who would realize they had no other good choice than to cop a plea. I had long ago given up on this possibility, and knew that we were either going to trial with Zvi, with Zvi and his brother together, or with the entire group of derelicts including Drimal, Jenkins, and Cutillo. I knew it was going to be uphill. Forget 3Com; that was a sideshow. But “conspiracy,” as my lawyers constantly told me, while it sounded like a fictionalized nightmare charge from 1984 or The Hunger Games, was, in the end, brutally real.

  Zvi and I nearly came to blows over “conspiracy” on more than one occasion at Sutton Place. I tried to convey the high-caliber spiderweb that “conspiracy” could become in the hands of a motivated prosecutor, but Zvi poo-pooed my concerns.

  “You don’t understand,” Zvi scoffed.

  “You’re not worried about this?” I said sarcastically. “Then why don’t you explain it to me?”

  “I’ve done my own work,” Zvi began.

  In trading, when Zvi talked about doing his “own work,” it usually amounted to little more than piggybacking someone else’s idea, or spending a few hours on Google spinning his wheels and selecting articles that confirmed his preexisting bias, while disregarding any evidence that might have made him think again. Not exactly an exhaustive, top-notch approach. The phrase was disturbing to hear because I now realized Zvi had likely used it while passing off extra-legal information as his own regarding trades.

  “And I’ve come to the conclusion that no one … no one! … has ever been convicted of conspiracy unless they were also convicted of an underlying substantive trade.”

  “No one?” I said doubtfully.

  “Nobody. And Cynthia couldn’t show me a case either.”

  Zvi’s lawyer at the time, Cynthia, had probably tried to tell him that his idea was absurd, and Zvi had likely responded by being Zvi. By saying something like: “Then, prove it. If it’s silly, show me a case; that shouldn’t be too tough.”

  “I can show you a dozen cases in an hour of legal research of people just convicted of conspiracy,” I growled at Zvi. “I’ve been told more than half the people in jail are there on a conspiracy charge alone.”

  “I’m only talking about insider trading. Find me an insider trading case where the guy gets convicted of conspiracy, but acquitted on the other charges.”

  Zvi’s filter of insanity and narcissism had just cut about 99.99 percent of the cases out there. Very few people in our industry actually go to trial, and those that do tend to be convicted of all counts, both substantive and conspiracy. Zvi’s idea was that he would not be convicted on the underlying substantive of 3Com or Axcan, and thus his dozens of hours of conspiratorial phone calls and informant testimony were irrelevant. It was novel—I’ll give it that—but ultimately meaningless. He was going to get convicted on both substantive charges, every conspiracy charge, and anything else the government wanted to throw into the indictment. He was glomming onto minor inconsistencies, while in the big picture, he was already a dead man.

  “Remember I didn’t trade Axcan,” Zvi wheedled.

  “I know, but the guy you gave it to did, and he made a few million,” I pointed out.

  “I told him I heard an idea,” Zvi said. “I didn’t even believe it myself, and that’s why I didn’t trade it. How could I be held responsible for what some other guy does?”

  “Because the lawyer that stole the idea is going to get up on the stand and say he passed it to your buddy. And then one of the traders downstream is going to say he got the idea from Drimal who told him he got it from you and … and that he knew it was inside info at the time. And then if that isn’t enough, the government is going to play an hour of recorded calls of you telling Drimal that shit. So just because you didn’t trade it doesn’t mean they’re not going to hang you.”

  “You’re fucking insane, you know that?” Zvi replied aggressively. “Try telling a guy on the jury, one of those $35K a year bums, that if you had a lotto ticket worth a million dollars, you wouldn’t cash it? That’s essentially what you’re telling them. I had an idea worth over a million bucks and did nothing with it. And I should go to jail for that?”

  It was true that Zvi could describe a situation in which he had heard big inside information and chosen not to act on it himself for financial gain. And yet he had received something for it. As the recordings would show, he had received the gig at Galleon.

  “Raj isn’t going to win,” I reminded Zvi quietly. I didn’t want to fight the real battle now, and my tone told Zvi that I was just voicing an opinion, not looking for a challenge.

  Moe had been right virtually every time, whether it was the wiretaps, Contorinis*, or any of the motions we had filed. From Day One, Moe had said “Raj has no shot,” and I agreed with him. I knew Raj was done. I think by this time everybody in the Northern Hemisphere knew that, with the exception of Zvi (and of course Nu, who was only following his brother).

  What I didn’t say aloud was that I suspected Zvi had an even worse shot at winning than Raj.

  “You don’t understand,” Zvi fired back, incapable of letting it go. “Anil Kumar is done. They made him look like a fool. His whole testimony was suspect.”

  “Why? Because he forged a doctor’s note?” I asked incredulously.

  “Goes to credibility,” Zvi said, suddenly turning nebulous and general.

  “No, goes to sleep … as in the jury was going to sleep. You don’t get it. Raj is like a murderer with the victim’s blood all over him, fingerprints on the weapon, and three eyewitnesses—but wait, one of them says he thinks the shirt Raj was wearing when he butchered that woman was sky blue, yet it turns out the shirt was actually robin’s egg blue. And you think that’s going to save him? It won’t make a fucking difference. Every witness has the same story on the important parts, and most of it is on tape!”

  Tapes that aren’t a tenth as bad as your tapes, I’m sure, you fucking scumbag, I thought.

  By now, Nu had sidled over to listen. Accustomed—addicted?—to drinking every night with me, or Zvi, or the other friend or two he still had, Nu heard the same propaganda from Zvi day in and day out. At this point, I wouldn’t have been surprised if Nu genuinely thought there was no chance of Zvi being convicted.

  “What about the tapes and Santarlas?” I asked again, since Zvi was mugging for the crowd around us with a “Ya believe this guy?” shake of his head

  But before Zvi could respond, someone pulled the string out of Nu’s back and he began squawking.

  “You know, the government thought they had a much bigger case. This was so trumped up … six stocks … the Octopus, whatever … And now it’s just one stock.”

  Nu
drank every night until he couldn’t remember. Not to black out, per se, but just enough to wipe the slate clean. Tabula rasa. On multiple occasions he would repeat the exact same stories on Wednesday night that he had regaled us with on Tuesday. His absentmindedness had become increasingly worse as Raj’s trial dragged on. Now, hanging out with Nu was like having my own personal Groundhog Day.

  “Nu, that doesn’t fucking matter,” I barked at him. “None of that matters. Just shut the fuck up.”

  I wanted to hear Zvi’s answer, not his. I had already told him fourteen times in the last fifteen months that the government could charge 200 stocks, 200 different counts, and you could be innocent on 199 counts, but if there’s one—just one—that you’re not clean on, jail still awaited.

  “Remember that terrorism case that was going on during the Contorinis trial?” I cried. “The guy that was acquitted of literally 199 out of 200 counts? Literally 199 out of 200! But guess what? The one count he was convicted on still carried a life sentence.* Big win for the defense lawyer and defendant, huh? Is that what you’re saying?”

  “I don’t know,” Nu said as though I were quibbling over something minor “The government blew this whole thing up out of proportion. They kept saying this was a massive conspiracy, $20 million run by the Octopus. But where’s the money? Where’s the …”

  “The Octopus?” I interrupted. “Are you fucking serious, man? It’s Octopussy! Not Octopus.”

  “Well, Octopussy. Whatever. You got what I’m saying.”

  “Yeah, we do,” I said, shaking my head, and turned back to Zvi, who was, by now, red from both alcohol and glowering.

  “So the government drops the entire case except 3Com?” I said to Zvi. “Now what?”

  “We throw that in their face and make them look stupid,” Zvi said. “Agent Makol perjured himself all over the arrest warrant and wiretap applications. Shankar perjured himself at his own allocution. Plate’s whole story is a fabrication he made up to cut a deal.”