Only $20mm for Raj at Galleon Group ??? I’d guess that this number is very wrong.

October 19

There have been a lot of really good stories written about the “you scratch my back, I’ll scratch your back” insider trading scandal at Galleon since the story broke last Friday.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aoHhSaJptk8o

At the daily morning meetings at Galleon, Raj would ask questions of the analysts, PMs, and traders. Nothing unusual here, as this happens everywhere, every morning.

Question: How much of the questioning was the result of “knowing” the answer, and then leading the questioning so that everyone else got to the answer, that you already “knew”?

Any really good analyst will act like a prosecutorial attorney – you never ask a question of your witness unless you already know the answer. In other words, your lines of questions are narrow, focused, and will lead somewhere – to the answer that you already know.

Therefore, if Raj already knew the answers to his questions, he effectively is leading the team at Galleon to trade in certain way. As a result, it seems highly likely that the whole firm is benefitting from insider information. As the whole firm benefits, so do its portfolio managers, and Raj himself. At the end of the day, how much of Raj’s net worth of $1.3 billion was tied to illegal trading activity? My guess - a very large proportion, meaning that Raj’s personal gain from the illegal insider trading was worth a LOT more than $20 million.

The next question? How long does Galleon last as an independent entity? According to CNBC this morning, Raj is at work, in a “business as usual” mode.

I doubt that Raj and Galleon last the week.