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Government Gets Tougher On Insider Trading

Publication Date: 
April 08, 2011
Source: 
Marketplace
Author: 
Stacey Vanek-Smith

Professor Joseph Grundfest spoke with Stacey Vanek-Smith of Marketplace on how the government has stepped up its game against insider trading, becoming more aggressive and using techniques commonly reserved for combating organized crime.

The government has stepped up its game against insider trading, using techniques that had been reserved for organized crime.

Galleon hedge fund partner Raj Rajaratnam departs Manhattan Federal Court after a bail hearing November 5, 2009, in New York City. Rajaratnam is facing insider trading charges. (Mario Tama/Getty Images) Jeremy Hobson: A major insider trading case on Wall Street moves into its next phase on Monday. That's when hedge fund billionaire Raj Rajaratnam will mount his defense in court.

As Marketplace's Stacey Vanek Smith reports, in its recent crackdown on insider trading the government is relying on good old fashioned phone taps for evidence.

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Stacey Vanek Smith: That's Galleon founder Raj Rajaratnam. He's accused of illegally making millions from insider tips.

Joe Grundfest: Some of the most powerful evidence that the government's presented has been Mr. Rajaratnam's own voice on recorded conversations. Mr. Rajaratnam has, in effect, testified against himself.

Joe Grundfest teaches corporate governance at Stanford law school. He says the government has stepped up its game against insider trading, using techniques that had been reserved for organized crime. And that has sent shockwaves through Wall Street.

Grundfest: The government is being more aggressive in building its cases by using wiretaps and other forms of evidence. And there's no doubt that people will change their tactics in response to the government's evolving enforcement techniques as well.