Arming And Coddling Our Criminals

Democrats and Republicans both provide comfort and help to our violent offenders. 

The Democrats (actually the Liberals who closely identify with them) have made jail terms shorter and more pleasant for felons.  They've had the death penalty abolished in 17 states and Washington, D.C., and cheered its erosion in the remaining 33.  The 12 killed and 58 injured by James Holmes in a Colorado movie theater have created headlines and the guilt or deliberate intent of the shooter is never in doubt.  Yet an insanity defense is almost certain and it will be many years if ever before this guy gets the ultimate punishment.  Something he would have dodged with certainty if he had chosen the "right" state - one of those 17 merciful ones - to stage his crimes.

Still, violent criminals everywhere should be heartened by the overall statistics.  There are about 14,000 murders committed in the US every year, and only about 43 of the guilty are eventually executed.  So the odds are very good that killers even if they're caught will spend their lives in prisons with decent food, stay, entertainment and health benefits, thanks to liberals' efforts and court directives by progressive judges.  Not to mention the opportunity to bask in media publicity and star in shows like "Lockup Raw."

About two thirds of our murders are committed with use of firearms.  And this is where the NRA backed Republicans are key to ensuring that our criminals are well supplied.  Some precautions like background checks are rendered meaningless when you can avoid them in gun shows.  But as remarkable is letting assault weapons like AK 47s or hand guns with high round magazines be owned for self-protection under the 2nd Amendment.  There have been ample studies like this one of Feb. 2010 in News Medical about how guns in homes do far more harm than good to the owners themselves, leave alone other victims.  Mere facts can't compete of course with the NRA's "Founding Fathers" rhetoric. If it was valid 200 years ago (when slavery and subservience of women was also the norm) many Americans think that alone is a good enough reason to continue such practices. 

There were several media laments about how Obama uttered platitudes but did nothing substantial after the Colorado massacre to force gun control.  But this close to elections I don't blame him.  A large chunk of independents or undecideds can be turned off by such a measure, and those who favor it may be upset, but they'll never switch to Romney.  And conversely, the same may hold though to a much smaller extent for Romney to stick to the NRA playbook. 

After the elections there should be a serious overhaul.  In September 2009 I suggested key changes to our criminal justice system, though these may shock Liberals as well as those on the hard right.  An articulate and astute President supported by some key Congressional leaders with similar qualities from both parties could make this happen.  They can win broad acceptance and acclaim from the "non-fringe" populace, and find alternative sources of campaign funding and support to replace some they'll lose from their extreme base.  See how many of these proposed changes you agree with.

On Rajat After The Verdict

A month ago on June 15 a jury found Rajat Gupta guilty of insider trading.  He faces sentencing with substantial jail time in October, although he will appeal and his lawyer said "This is only Round 1."  His best case scenario is overturning of the verdict on appeal, followed by retrial with a more favorable outcome - a harrowing process that will last years.

Headlines like the one in WSJ said "Insider Case Lands Big Catch" but this is misleading. It implies snaring someone who played a huge part in, or was at the root of insider trading.  Instead, Rajat's "bigness" lies in his fame and prominence in contributions to business and philanthropy, or the respect and esteem he was held in prior to being charged in this insider case. Any wrongful gains as a result of his alleged insider tip-offs adding up to a few million dollars to his friends (none to him personally) are dwarfed by his positive contributions to society, business and philanthropy.  Those could easily run into tens of billions of dollars, if quantifiable in monetary terms, quite apart from the way he profoundly touched people in personal contact with him.

Assuming he's guilty as charged (a jury's findings don't necessarily make it so) what caused him to act that way?  Even the prosecution said it wasn't for greed or "quick profits but rather a lifestyle where inside tips are the currency of friendships and elite business relationships." The Financial Times on June 19 and the WSJ on June 18 offer insights on how the Indian culture and way of helping friends could have affected Rajat's perceptions about passing on inside information.  While it is illegal just like in the US, "insider trading is widespread in India, and often not considered a serious crime."

Anant Rangaswami in his June 16 article "Rajat is no criminal, he's just an Indian" in FirstPost says, "... in India, many of us are bemused by the accusations and the conviction. A man goes to jail because he shared information with a friend? By that yardstick, half of India would be in jail.  Knowing people in power and to benefit from the knowledge and contacts that they possess is the ladder to success that Indians have recognised centuries ago.  It’s an ethos and a culture – and it’s deep-rooted...That’s the first step to insider information, to an unfair advantage.  But that’s what India is all about – having the contacts and taking advantage of the contacts to give one an edge...The moment everybody does it, we forget that, in the first place, what is being done IS wrong. And when everybody does it for decades and centuries, it’s so much a part of us, part of the way we behave and interact." 

But the US is very different with very tough laws against leaking of and trading on non-public information, right?  Well, no. It just depends on who is doing the leaking and the trading, and on the type of information.  Rampant legalized corruption existed right through till April 4, 2012 when under media glare and public pressure the Stop Trading On Congressional Knowledge (STOCK) Act was finally passed.  Till then Congressional leaders and their staffers could freely trade on stocks even if they knew these would be drastically affected by their pending or forthcoming legislation that wasn't public knowledge.  And even this law has deliberate loopholes that would let a truck through.

For instance, Ron DeLegge in ETFguide on April 12 writes: "When a hedge fund or an influence peddling individual wants inside information, they can still buy it – by paying members of Congress or other high level officials for something called "political intelligence." This rogue but still legal practice of gathering information from lawmakers and Hill aides is regularly used by Wall Street to steer money into profitable investments. It's nothing more than legalized cheating, because he with the most money and political influence wins.  CASE STUDY: Former US Treasury Secretary, Henry Paulson sold political intelligence when he tipped off hedge funds about Fannie Mae's rescue in 2008 while he was serving as the U.S. Treasury Secretary. Paulson's hedge funds pals made billions in illicit profits. That type of unethical conduct is still legal under the "new and improved" STOCK Act. ... Here's another gaping omission: The STOCK Act still allows elected officials to own stock in industries they can affect with their political power." 

On the non-government side another Paulson, hedge fund manager John ("JP") Paulson, packaged the worst mortgage backed securities he could find into the "Abacus" fund and bet heavily against them.  He then colluded with Goldman Sachs to dupe its own clients into buying these funds, causing them heavy losses.  "JP" as the counter party made $1 billion from this and got clean away with it. And a July 15, '12 NYT story describes how hedge funds and big investors widely use as yet non-public analyst inputs to gain improper trading advantages.

In sum the ethos in India as well as in US financial circles may have shaped the actions of an otherwise upright Rajat whose goodness and modesty I saw and mentioned in my March 29, '11 post.  He may not have considered it that big a deal to share scraps of yet-to-be-public information with a friend, especially if he was not personally benefiting from this.  Of course he must now be regretting if he did it, and is paying a terrible price.

Interestingly, my May 12, '12 post analogy about even Mother Teresa being prosecuted in our justice system if she committed a robbery was repeated almost verbatim by Judge Rakoff in court 5 days later.  He may have seen my post, or simply thought of the same analogy.  Either way he also hopefully considers a person's history of good deeds and overall conduct, though irrelevant in the charging and jury trial stage, to be a key factor when it comes to sentencing. 

Rajat is almost the diametric opposite of a face for financial greed and misdeed.   Unsavory Wall Street titans often give a portion of their ill-gotten wealth to charity or philanthropy to burnish their image, salve their conscience or feed their egos while lavishing the rest of it on themselves.  Rajat in contrast has used his talents and energies for doing good that outweighs the value of alleged illegal favors to friends by a thousandfold.  As for any personal gains he made none and ironically was instead stiffed out of $10 million by Rajaratnam who quietly withdrew his own investment from his ailing Voyager fund without informing Rajat. 

Some of the more sympathetic media coverage has highlighted Rajat's contributions and philanthropy in the abstract sense.  Yet just as much it's the personal goodwill and concern for those around him that has rallied friends to his side, including the 300 plus who signed an open letter at a website set up to support him.  I've interacted with him just about a dozen times, and yet he made a profound impression.  To see why, consider for example my first meeting with him and his ever warm and kindly wife Anita. (They may not even recall any of this as I understand that this was quite typical of their behavior.)

It was early 1991 and my family had just joined me from Shimla, India a few months after I joined my Ph.D. program at the University of Chicago.  The saintly Mr. P.K. Mattoo, retired Chief Secretary of Himachal state and my ex-boss whom I loved and respected had sent a little gift packet through my wife Anita to be given to his niece Anita Gupta.  All we knew through Mr. Mattoo was that his niece had married a fellow IIT student named Rajat "who after completing his MBA in the US had settled into a nice job in Chicago."

 I called Anita Gupta and learned they lived in the northern suburb of Winnetka on the opposite side of Chicago from our Hyde Park campus.  We combined dropping off their packet with a Sunday evening drive to pick up Indian groceries and dine in Chicago's Indian sector of Devon Street that was much closer to their home.  Keen to spare them any hassles (as we were strangers merely carrying an uncle's gift) I said to Anita Gupta, "We'll just have eaten so no food or drinks for us. We'll hand over the package, say hi and be on our way home. We'll be a little late - will about 8 to 8:30pm be okay?"

"Agreed, and that's perfectly fine," Anita Gupta assured.

We were late reaching Devon driving in traffic on unfamiliar roads (this was before the GPS and cell phone era) and further bogged down in shopping amid the crowds.  I reached Anita Gupta from a pay phone and asked if arriving as late as 9:30pm was okay as we'd been held up.  She again said it wasn't any problem.  "Remember, no food or drink for us," I reminded, "and we won't stop at this unearthly hour." "Okay, Baba," she said, "but just come in for a minute."

Using maps and directions we actually reached the Gupta home after 9:45pm.  The large estates and stately homes in the area set it apart from our typical neighborhoods.  Anita and Rajat with their three daughters behind them (their fourth was just a few months old) welcomed us at the door of  their mansion-like home.  After handing Mr. Mattoo's packet at that late hour on a Sunday we were ready to leave but Anita and Rajat urged us to come inside.

We were surprised when they led us to a large dining table set with four placements and a nice dinner.  They had guessed (correctly, despite my fibs on phone) that we may not have eaten properly at Devon.  "We've kept a little food for you," said Rajat softly, sounding almost apologetic for having ignored my request not to serve us anything.

Our kids had had a long day and our older daughter Sheena wanted to lie down right away.  Anita Gupta made soothing noises and their eldest daughter Geetanjali cheerfully led the way to her room where Sheena hit the bed and promptly fell asleep.

Then Anita Gupta and Rajat who had already eaten sat with us at the dining table as Rubina, Anita and I tucked into the food.  By the time we were done, both the Anitas were chatting like good friends as they cleared the table and put the dishes away.  The Gupta daughters were remarkably sweet and unspoilt considering their family's obvious wealth.  After dinner the elder three took Rubina away for play and kept her happily occupied.

Rajat and I went to the living room to be joined later by the two Anitas.  Rajat was as good a listener as he was gracious and time passed quickly.  I looked around and solemnly proclaimed that his company must be paying him really well to have a home like this.  The Guptas laughed and Rajat explained what he did.  That's the first time I had heard of McKinsey and it sparked my interest in management consulting.  He didn't let on about his stature at McKinsey.  Nor (so as not to rush us and I only learned of this by chance) that he had to leave for work at 6:15am the next morning.

When we finally collected our kids to leave the Guptas came out to see us off.  They weren't at all fazed at the sight of our battered old Honda Accord hatchback sitting incongruously in their driveway, and Rajat opened its door to help me settle the children in the rear seat. They solicitously gave us directions to I-94S for the drive home and we were on our way.  It was past 11pm.