Award-winning New Yorker staff writer discusses the clampdown on Wall Street corruption and explains why the trail has grown cold for prosecuting crimes that caused the financial crisis in the U.S.
The New Yorker’s George Packer
Tavis: George Packer is an acclaimed writer whose many notable books include “The Assassin’s Gate.” He is also a staff writer for “The New Yorker” whose latest piece focuses on the U.S. attorney trying to clamp down on Wall Street wrongdoing.
His article this week is called “A Dirty Business.” George Packer joins us tonight from New York. George, good to have you on this program, sir.
George Packer: It’s good to be with you for the first time.
Tavis: Surprise, surprise – there is somebody who actually cares about Wall Street misdeeds and is actually doing something about it? Tell me more.
Packer: Well, his name is Preet Bharara. He was born in India. He went to Harvard, Columbia Law School, did all the right things and ended up as the U.S. attorney for Manhattan, the Southern District of New York.
He inherited this case that had already been three years in the investigating when he arrived in office, which turned out to be the biggest case of insider trading in history. Just a couple months after he came into office he announced the arrest of Raj Rajaratnam, who headed a big hedge fund called Galleon, and a few of his associates in crime, and the wiretaps that had been used to get Rajaratnam ended up netting dozens, literally dozens of hedge fund people and lawyers and corporate types across the top levels and mid levels of industry and finance.
It has become Preet Bharara’s signature case, and the case was tried this past spring in Manhattan and on May 11th, Rajaratnam was convicted on all counts. Lots of other people pleaded guilty.
So in terms of nailing insider trading, which is really hard to get because it goes on all the time and it’s very easy to elude detection, Bharara has really put his signature on fighting corruption on Wall Street.
Tavis: I am not a cynic, George Packer, but every now and then, for the sake of a good conversation, I will play one on television. So I’m going to play cynic right now with you for just a second.
Packer: Do it.
Tavis: To your point of a moment ago, George, insider trading happens on Wall Street all the time. Wall Street is littered with white males. The majority of the folk on Wall Street who make all this money happen to be white males.
What am I to make of this reality, as a person of color, that the person who gets brought down is a person of color? He becomes the poster child. Am I really supposed to believe that this guy is the only guy and the worst guy, a person of color? With all the white guys on Wall Street, they find this guy?
Packer: Well, he’s from Sri Lanka and a lot of his associates are from South Asia as well, so you’re right, there’s an incredible trail that goes from company to company that always seems to land on the desk of the guy with the brown skin, whether he’s from India or from Sri Lanka or was born in this country but is of that background.
So I guess what I would say is two things. One, there are a lot of white guys and girls who got caught in this dragnet, too. Rajaratnam became the most famous because he’s the one guy who went to trial, who fought it all the way to trial, and he also was the guy who was making the most money and seemed to have his tentacles in the most places.
He seemed to be – all the roads seemed to lead back to him. He was kind of the master manipulator who had sources across the country and across the world, but they were all feeding back to him.
But there was another trial, actually, that just happened last week here in New York in which a fellow by the name of Zvi Goffer and his brother, Emanuel Goffer and a third guy named Michael Kimelman also all got convicted.
So it may not be quite as much of a case of profiling as it seems from the outside, because it’s actually quite a cross-section of multicultural America that’s been caught in Preet Bharara’s net. And let’s not forget Preet Bharara himself is a person of color, and so are some of the people who’ve been on the investigative side of this.
The way I see it, I don’t know if this is cynical or what, but in this sense, the South Asians have arrived. They’re on both sides of this big case – they’re both the prosecutors and investigators and they’re at the top of finance and industry getting caught. To me, earlier generations of other kinds of minorities in America have been in this situation before and in an ironic sort of way it was a sign that they had kind of come to the center of American society.
Tavis: So I’m done playing thespian at the moment. I will take off my –
Packer: No, but there’s one more thing, there’s one more thing that we need to talk about as far as cynicism goes.
Packer: Which is why that hedge fund managers who are relatively small players, and whatever the color of their skin, are getting caught, and the big bankers are not going to jail. I don’t know if you were going to ask me about that, but that’s a cynical question, yeah.
Tavis: I’m glad you raise that. You’re not a cynic; in fact, you are prophetic and you’re prescient because that’s exactly where I wanted to go. The larger question is, race set aside, why it is that some guys are being caught, others are not being caught. You make the distinction now, so go ahead and unpack it for me.
Packer: Yeah, we could say that insider trading, while it’s a crime and it’s insidious and it’s absolutely ubiquitous in certain financial circles, is not the thing that brought down the banks, and with it, the American economy, and with that, millions of people’s jobs, houses, savings, retirement and future.
That was called a financial crisis, and that was caused by the reckless practices of executives at the top of the biggest banks and lenders and insurance companies in America.
Not a single one of them not only has gone to jail, but has even been prosecuted for what happened in 2008.
Tavis: Why not? Why not?
Packer: Well, I asked Preet Bharara, because I actually went into this article kind of thinking like others that it’s an outrage and that it’s obviously a failure of political will, and possibly even worse, a coziness between top officials and the top bankers.
I would say it is a failure of political will. I think Washington has failed to make it a priority, both under the Bush administration and under the Obama administration. The higher priority was to stabilize the banks, and stabilizing the banks might have seemed like it would be undercut by prosecuting the bankers, and the decision was made, or at least the trend of things went towards stabilizing rather than prosecuting.
But I think at the level of Preet Bharara, a U.S. attorney who isn’t making political decisions, it’s really hard to make a case like that. It’s really hard to go after these guys with limited resources after the fact. It’s what they call a dead body case. The crimes have already happened and the banks are huge. The bankers are insulated by lawyers and accountants. They have the best representation money can buy in America, and they’re very hard targets to get.
The criminal law sets a very high standard, which is criminal intent beyond a reasonable doubt, and in my article I walk through Preet Bharara’s explanation of why it’s so hard to make a case based on the facts from 2008, when criminal law has such a high standard.
Tavis: But here’s what I don’t get, George, and again, some will call me a cynic for asking this question. I don’t think this is cynical at all. But it’s so much easier for Lamal and Leticia and Hector to get caught on the street corner, but the bar seems to be so high, to your point, it’s not easy to make this case stick.
Why is it that everyday people can go to jail, I mean, get thrown under the jail, but the bar is so high for catching these white-collar criminals?
Packer: I think it’s because they’re so insulated from the crimes. Here’s an analogy – it’s a little like the street-level drug dealer and the international narcotics trafficker who may even be a guy in a suit sitting behind a desk in a corporate office.
They are so far above the level of where the crime can be more easily identified, which is, say, a fraudulent mortgage or a fraudulent financial report or an investment that was sold under spurious auspices, there are so many levels between them and the guys who are doing that, and they’re so careful.
They don’t leave any mail trail. They know that people are going to be looking into this stuff. They’ve got lawyers and accountants telling them this is okay, it smells good to us, so they can always point to that if it ever comes to court. They are very well-padded.
So it’s just – in a sense, they’ve outsourced criminal activity to people at much lower levels.
Tavis: I wonder, and over the years, of course, because of the nature of the position, there are always stories about the U.S. attorney covering Manhattan. Just the nature of the job means you’re going to get a lot of press because you’re in New York City.
Tavis: Tell me about the profile, the kind of profile of the kind of person that would want this job, that would be good at this job. Because it’s a tough job and you don’t make a lot of friends, and you’ve got to prosecute the elites.
Packer: Yeah, that’s true. You’re absolutely right; the Southern District of New York has this long history of trying big cases, of really swinging for the fences. Giuliani was a prosecutor, the U.S. attorney for the Southern District. He went after political corruption and also the Ivan Boesky-Michael Milken insider trading case, which was a big case back in the 1980s.
It made his career as a politician. I don’t know that Preet Bharara has political ambitions, although there are suggestions that he does. I think what Preet Bharara brings to it is a kind of a toughness combined with real intelligence. He is tough, and he’s gone after some big players not just on Wall Street, but politicians, terrorist case. He went after gangs that were destroying life in a little town on the Hudson River.
He’s gotten some very, very big cases in his short two years in office. I think it’s his toughness and his thoughtfulness about society. He gave a series of speeches when he first came into office about corruption in the white-collar world. He made that his focus. Not the mob, which is more traditional for the U.S. attorney here in New York, not drug dealing, not immigration issues, but white-collar crime.
That became his target, and he did not make friends on Wall Street with that target, but I think he understood that we have a serious problem of just erosion of trust in these financial institutions and it took a prosecutor to put a little bit of fear into the heart of people, and to concentrate the mind of people on Wall Street.
Tavis: I got a quick 20 seconds here. I wonder whether or not, your article notwithstanding, whether or not the American people should believe or hope that we’re going to see more Wall Street prosecutions in the future.
Packer: I think it’s less likely with every month. These are now cold cases. The evidence is drying up. The statute of limitations is actually going to expire in a couple of years. So I think the opportunity was really there in 2008 and ’09 and maybe ’10, and it’s less likely now.
It’s not impossible, and he held out the suggestion that there may still be cases, but we missed some chances and they won’t come again.
Tavis: That’s wack. George Packer of “The New Yorker,” good to have you on the program.
Packer: Okay, good to be with you.
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