Confessions of a Wall Street Insider

A Cautionary Tale of Rats, Feds, and Banksters

Michael Kimelman

• Publisher: Skyhorse
• Year: 2017
• ISBN:
  9781510713383
• Topic: Business
• Subtopic: Servizi finanziari
• Index: Business

Although he was a suburban husband and father, living a far different life than the "Wolf of Wall Street, " Michael Kimelman had a good run as the cofounder of a hedge fund. He had left a cushy yet suffocating job at a law firm to try his hand at the high-risk life of a proprietary trader — and he did pretty well for himself. But it all came crashing down in the wee hours of November 5, 2009, when the Feds came to his door—almost taking the door off its hinges. While his wife and children were sequestered to a bedroom, Kimelman was marched off in embarrassment in view of his neighbors and TV crews who had been alerted in advance. He was arrested as part of a huge insider trading case, and while he was offered a "sweetheart" no-jail probation plea, he refused, maintaining his innocence.The lion's share of Confessions of a Wall Street Insider was written while Kimelman was an inmate at Lewisburg Penitentiary. In nearly two years behind bars, he reflected on his experiences before incarceration—rubbing elbows and throwing back far too many cocktails with financial titans and major figures in sports and entertainment (including Leonardo DiCaprio, Alex Rodriguez, Ben Bernanke, and Alan Greenspan, to drop a few names); making and losing hundreds of thousands of dollars in daily gambles on the Street; getting involved with the wrong people, who eventually turned on him; realizing that none of that mattered in the end. As he writes: "Stripped of family, friends, time, and humanity, if there's ever a place to give one pause, it's prison... Tomorrow is promised to no one." In Confessions of a Wall Street Insider, he reveals the triumphs, pains, and struggles, and how, in the end, it just might have made him a better person.Skyhorse Publishing, along with our Arcade, Good Books, Sports Publishing, and Yucca imprints, is proud to publish a broad range of biographies, autobiographies, and memoirs. Our list includes biographies on well-known historical figures like Benjamin Franklin, Nelson Mandela, and Alexander Graham Bell, as well as villains from history, such as Heinrich Himmler, John Wayne Gacy, and O. J. Simpson. We have also published survivor stories of World War II, memoirs about overcoming adversity, first-hand tales of adventure, and much more. While not every title we publish becomes a New York Times bestseller or a national bestseller, we are committed to books on subjects that are sometimes overlooked and to authors whose work might not otherwise find a home.

CHAPTER SIXTEEN

A TALE OF TWO TRIALS

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RAJ RAJARATNAM WAS LIKE A BLACK hole. That’s not a ding on the man’s legendary physical girth. Rather, I use those words because, as the head of one of the most impressive hedge funds on the planet—one that managed to stay afloat and even prosper right up until his arrest on October 16, 2009—Raj sucked all of us into his orbit. Pulled us in whether we wanted to be there or not. My destiny became inextricably tied to Raj’s, even though he and I had never exchanged more than a few innocuous pleasantries.

Raj’s company had become the Enron of hedge funds. Remember that before Enron’s collapse, the big investment banks had wanted in and all the savvy financial journalists touted its impressive success. That was Raj. That was Galleon.

Just as Enron’s undoing had surprised so many, Raj’s arrest also came as a total surprise, even to some of his own staff. (An unnamed colleague of Raj’s at Galleon famously came into work, noticed the changed environment, and asked if Raj had been arrested for terrorism.*)

Roughly a year and a half would pass until Raj stood trial, professing his innocence till the very end, even while the folks tied most closely to him—most notably Danielle Chiesi and Anil Kumar—pled guilty or cooperated with the prosecution. Raj’s trial was the big one. The one the Feds all dreamed about and looked forward to. Feds looked forward to trials like this the way Wall Streeters like us looked forward to deals big enough to put us out of the game. We all knew that grandstanding was going to be a massive part of the proceedings. The lead prosecutor Preet Bharara saw this—perhaps correctly—as his career-defining case. The importance of its outcome, on the eve of my own trial, cannot be overestimated.

So I wasn’t going to miss it for the world.

In the real world, even the most scintillating trials—featuring marquee defendants and famous lawyers—would be shockingly disappointing to a generation raised on the likes of Law & Order and Ally McBeal. On those shows, evidence is all sexy smoking guns, and whichever side delivers the most spectacular bombshell finale is the winner. In the real world, both sides must telegraph their evidence, witnesses, and lines of questioning well in advance. Instead of showing fireworks and passion, counsel spends huge chunks of time mindlessly setting the foundation, just to get some minor piece of evidence admitted. Even a desperate insomniac would flip past a Court TV broadcast at 2 a.m. for a random Law & Order rerun. Any sane insomniac, anyway.

When the highly anticipated “Raj trial” began, it was a sensation on Wall Street. Not since the days of Giuliani v. Boesky had the public and the press been treated to the spectacle of such a good white-collar criminal case at 500 Pearl Street, the Manhattan Federal Court—home field of the Southern District of NY (SDNY), and also known as “The Office.” The SDNY prosecutors consider themselves (and generally speaking probably are) the best the country has to offer. Their track record is 98 percent conviction rate, courtesy of an extremely uneven playing field, with the laws and procedures heavily tilted in the government’s favor, not to mention their near unlimited resources. And pitted against them are many defendants who can’t even afford to pay for a competent attorney. A big part of the drama in Raj’s case was that the boys at the SDNY would be facing a well-heeled defendant with enough resources to pay for—not just a good attorney—but for practically any attorney he desired.

Raj eventually settled on a team from powerhouse DC law firm Akin Gump Strauss Hauer & Feld, captained by John Dowd, a grumpy old Marine famous for defending Senator John McCain during the Keating Five debacle, and repping Major League Baseball in its case against Pete Rose. Dowd had been practicing law longer than I’d been alive.

Of course, we all went to watch.

Before the first morning court session, I was in the eighth-floor Federal Cafeteria, trying to order an egg sandwich from a surly cook, his government tenure empowering him to provide neither service nor a smile while working. Nu and Zvi came up behind me and tried to strike up a conversation.

“How long before Dowd puts that runt Brodsky in a headlock?” Zvi asked, a big smile on his face, referring to Reed Brodsky, one of the AUSAs prosecuting the case.

I offered a quick hello after looking around to make sure the cafeteria was empty of possible enemies.

“No fireworks today,” I opined in low tones, “but by the end of the first week I expect the prosecutors to be pleading for an intercession from Judge Holwell over hurt feelings stemming from some Dowd comment. He’s going to hurt their feelings a lot.”

I was confident when it came to Raj’s lawyer. I thought he had hired the ultimate badass. Zvi thought so too.

“They’ll be crying like little bitches when Dowd gets through with them,” Zvi agreed. “Anil Kumar is going to be called ‘Anal FUBAR’ by the time Dowd’s done with him.”

It was a bit inelegant, but I liked it.

For Zvi, this was all sound and fury—prologue to a dance that could end in only one conceivable way. Raj would be acquitted, and then so would he. Zvi was sure of it. At that point a woman and a man walked through the door in classic government haircuts, short and combed to the side, deliberately unstylish. I turned my back so they couldn’t see my face and, after they passed, rotated back to the Brothers Goffer.

I said: “Listen, I’m not trying to be an asshole, but I can’t be seen talking to you guys here.”

Nu scrunched his face like he wasn’t sure what I was talking about. But Zvi got it instantly. The government’s case against me operated on the assertion that the three of us were thick as thieves. The government needed me to be part of the mega-conspiracy.

I didn’t know if Zvi knew it, but my only real avenue to salvation at this point was to convince Zvi to plead guilty, to own up. The AUSAs on my case had not only offered me a generous probation-only deal to plead guilty to one count, but in further discussions, they had also indicated that if Zvi and Nu were to take a plea, they would drop my case and offer me a “deferred prosecution”—the home run outcome. So it was friends close, but enemies closer until I could pry open Zvi’s stubborn eyes and wake him to the fact he was DOA, facing a “dime” if he saw this through to the end.

“You got me?” I continued. “This is just the way it’s gotta be for now. I’ll meet you later at Sutton Place if you want to compare notes, but not here.”

Zvi nodded. He understood.

The government’s opening statement was delivered by Jonathan Streeter. Prior to Raj’s arrest, Streeter had actually been in the process of interviewing for a job with my lawyer, Michael Sommer. With Raj’s arrest, he’d decided to stay where he was to captain the high profile prosecution. It’s easy to understand why. Such cases come but once in a lifetime. The opening statement was just about laying out the government’s case in broad strokes. There were a few dramatic details to hook the jury, but mostly it was just the overview of what the government would “prove” throughout the course of the trial.

By then, most everyone knew that the case against Raj was strong. The government wasted no time painting Raj and Galleon as a cesspool of dirty money, and as corrupt insiders bending good men to their will and making obscene, unlawful profits. Making more in a day than decent folks like “you and me, who play by the rules” will make in a lifetime.

When Raj’s champion John Dowd took the podium, the entire gallery waited in eager anticipation … and kept waiting. He reminded me of a former heavyweight champ climbing back into the ring after an extended absence, a dusted Ali in his fight against Larry Holmes—thirty pounds overweight, no bounce in his step, no sting in his jab. Dowd droned through a long, scripted opening that did little to dampen the government’s theory. It was the last proof I needed that Dowd was finished, a warrior past his prime living off a once-vaunted reputation.

I’d gotten a sinking feeling this might be the case during the pretrial hearing when Dowd had inexplicably allowed Agent Kang to wiggle off the stand during the Franks wiretap hearing (a hearing to determine whether a search warrant was legally obtained). Pretrial, Judge Holwell had granted Raj’s motion for a Franks hearing to determine whether the government had filed a misleading wiretap application. The mere fact that a Franks hearing was held at all was a huge victory. It meant that Raj’s team had demonstrated to Holwell that they had met the preliminary burden of proof showing that (1) the government had knowingly and intentionally, or with reckless disregard for the truth, included a false statement in the wiretap affidavit and (2) that “the allegedly false statement was necessary to a finding of probable cause.” In other words, the government had lied their way through the wiretap affidavit.

But then, Dowd had not pursued it. He had not delivered the knockout blow. This was more than a little disconcerning.

The Goffer brothers attended Raj’s trial with Kucharsky, their “paralegal,” a balding, chain-smoking friend from SUNY Binghamton, who struck me as more of an inept hatchet man than any sort of actual paralegal. When Zvi introduced me to him, I asked what firm he worked for (none) and what kind of legal experience he had. (“He’s good at that stuff,” Zvi said, which also meant none.) But a lack of education or legal experience didn’t stop Kucharsky, or Zvi for that matter, from opining with absolute certainty on every aspect of Raj’s case.

Even though the deadline for a deal had passed, I knew the government would accept a plea from Zvi up to a month before trial. The Raj case was my last real chance to convince Zvi that his decision to go to trial was pure suicide.

I wanted to say: “If Raj has a 10 percent chance, you have a 1 percent chance. Take the deal.”

But Zvi’s focus was, unbelievably, elsewhere.

“Did you see that smoking blogger for Biz Insider?” he asked me one day. “Tall brunette with an accent? She’s all over my dick. Kept asking who I was, who my brother was. I finally told her with a wink on the way out of the courtroom, ‘You’ll find out soon enough.’ Teased her perfectly. I bet she was soaking.”

It was infantile. It was insane. Ten years of Zvi’s life were on the line, and he was talking like Donald Trump in an Access Hollywood trailer.

Sure enough, the next morning Business Insider’s Katya Wachtel posted a blog entry about the three mysterious men, sweating in their Jos. A. Bank “Buy 1, Get 2 Free” ill-fitting suits and mismatched dress shirts, looking like contract killers from Belarus.

On Day Three of the trial, I called my good buddy, Peter Bogart.

“You’ve got to see this, man,” I told him. “Trust me. Come into the city.”

Pete and I linked up around 8:45 a.m. for the 9:00 a.m. start. A healthy crowd was already buzzing. Press from the Wall Street Journal, New York Times, and other top media outlets and cable channels were camped in the front, along with the Brothers Goffer, their “paralegal,” and a colorful mix of Raj team members right behind them. A few news anchors stood in front of cameras, announcing highlights of the trial. When they ran out of specifics, a woman with the NY Post pondered what it must be like for Reed Brodsky’s wife to have given birth to her first child while he was spending eighteen hours a day on a case. Others offered bland congratulatory words, while mentioning the incredible sleep deprivation and pressure Brodsky must be feeling, working to balance such a high profile case and the birth of his new baby girl.

Zvi took in snippets of all this. It made him grind his teeth. Brodsky’s recent fatherhood was news to Zvi. He had a slightly different take on the event, which he shared with Nu in a voice loud enough to be overheard.

“So he had a baby girl, huh?” Zvi said. “Fuck. I was praying the baby would come out stillborn.”

It was insane. Unbelievable. (Fucking Zvi!) Nu tried to shush him, but Zvi was only spurred on by the wide eyes and dropped jaws rotating in his direction.

“What?” Zvi said, gesturing to no one and everyone. “He wants to take my children away from me, and for what? For hearing a few secondhand ideas and not making a penny? Fuck him. I want to see how that scumbag likes losing a child.”

Even Nu was smart enough to know that praying out loud for the death of a prosecutor’s newborn in front of the press wasn’t wise. Nu stepped in front of him and physically shut him up. Zvi had gotten what he wanted, though. He had successfully shocked the press corps. For me, it was the final proof I needed that my fate was tied to a madman, to a sociopath that cared for and about no one other than himself.

Pete leaned and asked: “Did Zvi just say what I thought he said?”

I nodded.

There had always been a part of me that had feared Zvi on some primal, animal level. Now I feared him even more—and on new levels. Zvi could hurt me from a legal perspective, he could hurt my reputation, he could hurt my chances of going free, and he could still hurt me physically. There were probably other ways he could hurt me too, that I hadn’t even thought of yet.

Desperate people make desperate moves.

I was finding that out the hard way.

Hundreds of trials take place every day around the country. No more than one quarter of those courtrooms are anywhere approaching full. In fact, a completely full courtroom is a rarity. Yet that was precisely what we had for the trial of Raj. The stiff marshals were reveling in their newfound attention and power, directing traffic like it was opening night at a Broadway show.

“No drinks! No papers! No magazines! Agents and press first. Please sit in the first row.”

After fifteen minutes of waiting, the crowd busy scoping and gossiping, one of the marshals barked the only part of a trial that would be familiar to Law & Order fans: “All rise.”

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 g...