So the Home Team managed to salvage a categorical victory after the embarassing whitewashing to Michael Lauer’s defense team. Bravo, chaps! Well done! Hopefully this might be the start of some more serious flogging of the at least some of the more notorious contrapreneurs and cheaters of this past decade.
It was sad (for the criminal justice system) that Lancer’s Lauer slipped away. However, I cannot decide which of the black hats’ perpetrations were more offensive. Lauer blatantly and cynically stole from those who had relied upon him as a fiduciary for his own parochial gain. He seemingly did this in a most premeditated and calculated manner such that there was (to the cognoscenti) no doubt about his intentions. This is willful fraud and deceit and should be dealt with harshly since failure to do so condones the behaviour and spawns others to pursue such malfeasance.
Raj, in his defense, didn’t commit fraud, nor violate the trust placed in him as a fiduciary, unless potential disgorgement of profits is on the list, though it is probable that (like SAC) many investors knew he was stretching the proverbial envelope. Rather, he stole from the faceless market, though it must said, there were indeed willing others on the other side of his trades. The thing is, they were willing participants at the price, and, it is likely, would have transacted anyway with a counterparty. I was about to add “fair or foul”, to that last sentence, however, it is almost certain they would NOT have transacted given the material non-public information teased from umm …errrr…. it seems nearly everyone from every profession. But that is the risk to every trader’s trade: someone knows more than you; someone can forcast better you, someone like Wayne Gretzky sees the play unfold better than you, seemingly in slow-motion while it passes lesser mortals by until its too late. But Raj Rajaratnum is no Wayne Gretzky. He is a cheat, that knew the rules, but decided to clearly and cynically break the rules for parochial monetary gain and it would seem to feed his ego. By extension, it was also Fraud, since the many investors who did NOT know he was cheating were fraudulently deceived. They thought they were buying the services of a thorough researcher – NOT a cheating scumbag, who parlayed his position into a circle-jerk of favors to big fish and minnows alike. Like Madoff, the Fraud allowed him to create a larger fraud and leverage little cheats and deceptions into something systematically large, to the point where (like the reinsurance price-fixing scandal, or like Lichtenstein’s Steel Partners ramping of in-portfolio shares in order to colelct more performance fees) it becomes entrenched, and SOP for the wanna-get-rich crowd pursuing a fatuous dream.
Whew…now that I have got that off my tits, I still cannot say who should be drawn and quartered first (though I lean towards Lauer for pure calculating cynicism).
One final thought: it is a shame there is no shame. I recall a youthful summer spent in Northern Ireland. On a visit to friends in lovely Armagh, in search of something other to do than drink endless pints of Guinness, I went for a tour of the Observatory. When I returned to the pub with my tales, all the locals had a laugh as they recounted with glee the story of a local senior clergyman who’d been caught diddling some of the younger members of his flock (no pun intended). Rather than let him be shipped anonymously to the clink, or assigned elsewhere by the church, the townsfolk insisted he visibly remain in Armagh, and was assigned to tour-guide at the local landmark (none other than the Observatory!!) – one visited by school children from all over Northern Ireland. Such was the notoriety his case, he was, in effect, publicly shamed, humiliated, and ridiculed day-in and day-out for his remaining years, in a manner that arguably was more severe than jail. Though in Japan (and pehaps some other traditional societies) shame remains truly a stigma and a veritable deterrent to all manner of rule-breaking, we, in the modern west, have lost virtually all semblence of shame, and in many cases, are the worse for it.
And Michael Lauer, who despite losing the civil case, is planning a return to Hedge Fund Management….