When U.S. Attorney Preet Bharara speaks, Wall Street and the world listens

preet Mario TamaGetty Images.JPGPreet Bharara, U.S. Attorney for the Southern District of New York, is pictured in this 2010 file photo.

As if he hadn’t given corporate America enough to worry about.

Preet Bharara, the top federal prosecutor in Manhattan, stood before a power breakfast in New York earlier this year and delivered the message: Cyber crime is a growing threat to the country and the business community’s head-in-the-sand response isn’t helping.

The U.S. attorney already has been souring executive stomachs with warnings — chiefly in the form of criminal complaints and guilty verdicts — that companies weren’t doing enough to fight the silent scourge of insider trading.

He’d already reminded them that embarrassing headlines and damaged reputations of companies often are the consequence of failures at the top to instill ethics in the soul, core and marrow of their workplace.

Now Bharara found another way to show them the fragility of corporate empires. By failing to take cyber security seriously, by failing to report hacks and by failing to prevent them in the first place, companies not only set themselves up to lose millions of dollars and harm customers. They’re also setting back efforts to fight a faceless, placeless and metastasizing enemy.

"In the modern era, it is simply no longer enough to leave cyber security matters to the ‘geeks,’ " he said. "Companies can choose to do that, I suppose. But if they do, I can guarantee that they will be left behind. They will be hacked. And they will be sorry."

When Bharara speaks, people listen.

His influence over the business community and broader public life is the result of his astonishing rise from the ranks of anonymous government attorneys. In just three years, the 43-year-old Bharara, who grew up in Monmouth County, has become one of the most recognized and applauded law enforcers in the country.

His name, once a struggle for newscasters to pronounce, now gently cascades off the tongue: "bah-Rahr-rah." His face, dominated by a pair of sapphire eyes, has peered out from the cover of Time magazine.

In some respects, the attention is thanks to a roster of cases Bharara inherited when President Obama appointed him U.S. attorney for Southern District of New York. Just days after the public ceremony where he was sworn into office, agents from the Federal Bureau of Investigation descended onto the Manhattan palace of the hedge fund titan Raj Rajaratnam and led him away in handcuffs to face charges from Bharara’s office. It was the curtain-pull on what’s proved to be the first act of the largest insider trading bust in U.S. history.

Since that fateful day Oct. 16, 2009, dozens of other hedge fund managers, corporate insiders and their go-betweens have been charged and convicted of being part of an insidious white-collar black market of buying, selling and trading on confidential information. Some, like Rajaratnam, were convicted largely on the sound of their voices booming out from government wiretaps.

RAJARATNAM SENTENCING.JPGRaj Rajaratnam, co-founder of Galleon Group, was sentenced Oct. 13 to 11 years in prison for insider trading. The U.S. Attorney's Office for the Southern District of New York prosecuted the case.

So far, the Southern District’s record against insider trading is 66-0. And with that, Bharara’s star has risen. But while he had little to do with the years of groundwork it took to make these cases happen, he quickly filled a role that’s arguably just as important as gathering the evidence to put a criminal behind bars.

It’s delivering the message that speaks to the seriousness of the government’s mission, that deters wrongdoers and compels good citizens, corporate or otherwise, to behave responsibly.

Bharara’s remarks at news conferences and in speeches are often dazzling and filled with tough talk about the use of wiretaps and snitches to catch crooks red-handed. But he’s gone beyond these warnings to impress upon corporate leaders and gatekeepers who are listening that they, not the government, have the responsibility to ensure their company and their workers do the right thing and not glide along a gray legal line.

Otherwise, he says, they face the possibility of a U.S. attorney’s subpoena or FBI search warrant, which have all the grace of a lobbed grenade.

Talk like that’s gotten people’s attention.

Among other things, it’s led some to wonder and speculate about what’s in store for a prosecutorial wunderkind with a penchant for pithy speeches, now that he’s headed into the final stretch of a four-year appointment as U.S. attorney.

Others who have had star-turns running a U.S. attorney’s office, namely Chris Christie and Rudy Giuliani, have vaulted into elected office and won a spot on the national stage.

Bharara insists that he has no designs on a similar path. "That has no appeal for me," he said in a rare interview.

"I would like to stay in this job so long as the people who are in the position to let me do so, let me do so," he said. "I'm not kidding when I say it's the best job I could ever hope to have."

Dreams Come True

This is Bharara's American dream.

It’s not the entrepreneurial fable of rags to riches — that’s the story of Bharara’s younger brother Vinit, who in a garage co-founded a business that sells diapers over the internet. Amazon.com liked it so much it bought the business for a cool $540 million.

Rather, it’s the dream of a boy from Eatontown who at an early age found his calling in the courtroom, and who has spent his life since in steady pursuit of it.

Bharara was born in Ferozepur, a city in India’s northwestern province of Punjab, along the border with Pakistan. But he knew little of that life growing up. His family left India when he was an infant. They headed first to England, then Buffalo, N.Y. By the time Bharara’s brother was born in 1971, his family had settled in New Jersey.

The brothers’ childhoods were typical American ones, even though their family was one of the few in their community from India at the time. Bharara recalls days spent at Monmouth Mall, scouting with the Webelos. His first job was a morning paper route delivering The Star-Ledger; Vinit had the afternoon shift, pitching copies of the Daily Register of Red Bank. Meticulous even then, Bharara kept a steno notepad, recently unearthed by his father, to chart his weekly pay.

A typical childhood, but one blessed by both opportunity and the expectation that they seize it. Bharara’s father, a pediatrician in Asbury Park, enrolled his sons at an early age in the Ranney School, an exclusive prep academy in Tinton Falls, and pushed them hard. "If you got a 98, he wanted to know why you didn’t get a 100," Bharara said.

The hard work paid off. Bharara graduated class valedictorian in 1986.

As a child, Bharara assumed he would follow his father into medicine. But along came "Inherit the Wind." In seventh grade, he read the play about a courtroom battle between public hysteria and fundamental freedom, and was captivated by the men who were both its heroes and villains: the lawyers.

He followed the call of the law through high school. Vinit Bharara recalls stepping outside to play sports with friends, only to turn back around to see his older brother consumed by a history book. He committed great orators to memory and used their words to defeat foes at debate team challenges.

It was at some point between Harvard University, where Bharara received his bachelor’s degree, and Columbia Law School where his focus tightened on becoming a prosecutor.

"I realized that to be a prosecutor in the finest tradition is to actually never have to make an argument you don’t believe in, and to never have to spend a day at work not doing what you think is the right thing," he said.

"It can sound corny," he added, "but if your job is doing what you think is right and making the world better, there is unbelievably great job satisfaction in that."

Setting the Stage

A law school course taught by the future Attorney General Michael Mukasey set Bharara's sights on becoming an assistant prosecutor in the Southern District. Mission accomplished in 2000, when Bharara left private practice to join the office. For five years, he prosecuted organized crime. Then, in 2005, Sen. Charles Schumer, the New York Democrat, plucked Bharara to be his new chief counsel.

It was a role that eventually set the stage for Bharara’s job now.

One of 93 offices of the U.S. attorney, the Southern District generally is regarded as the most powerful outside the Department of Justice’s headquarters in Washington D.C. In addition to having Wall Street in its backyard, the Southern District has jurisdiction over Manhattan, the Bronx and six upstate New York counties. It handles a dizzying array of complex cases, from public corruption to international drug trafficking to terrorism to street crime to financial frauds. The office has even intervened to return a looted Tyrannosaurus skeleton to Mongolia. But the insider trading cases have come to define Bharara’s tenure, if only because they’ve garnered the most attention.

Bharara sometimes gets painted in the media as listening to wiretaps as people divulge inside information or ducking into courtrooms as a key trial is under way. He gets brandished with a proverbial silver badge and spurs on his boots. "Notwithstanding the flourishes of the occasional journalist, I am not the sheriff of Wall Street," Bharara told a gathering of Wall Street compliance officials and lawyers last year. "In many ways, you are."

As the U.S. attorney, his work is a bit different from that of his deputies. He doesn’t investigate cases or cross-examine witnesses before a jury. His role is more to manage the 230 assistant U.S. attorneys who report to him. "I try to do what a recently retiring U.S. attorney said he tried to do during his tenure, which is to get out of their way and let them do their great work," he said.

Springsteen William PerlmanThe Star-Ledger.JPGHe's a 'Boss' man: Former colleagues say it's not unusual to hear Bruce Springsteen's music playing in Bharara's office.

On the desk in his expansive office sits a box marked "In" stacked with papers. Next to it is a relatively empty box marked "Out." In person, Bharara exudes a benign temperament that belies the tough talk he makes in speeches and at news conferences. He speaks with the fast clip of a New Yorker, and his words are inflected with a good-natured poise and, occasionally, sly humor. As he sat for an interview in his office, he kept himself pitched on his chair’s back legs, its dark wood creaking, his balance never faltering.

Those who have worked with Bharara describe him as a leader who’s in the trenches, walking the hallways of the Southern District. He chats up prosecutors about their cases and can discuss with them intricate details. “Preet is very present within the office,” said Christopher Garcia, the former head of the securities and commodities fraud unit who’s now a partner with Weil Gotschal & Manges. "He definitely has his finger on the pulse."

There are challenges, of course. Budget constraints have squeezed resources. A hiring freeze remains in place even after several top prosecutors have left for the private sector.

"That can be a challenge to try to figure how to balance all your cases and make sure you're doing all the public good when you don't have the same resources that you might have had a few months or a couple years ago," he said.

Hearing the People

For all the justice it has brought against inside traders, the Southern District, like other law enforcement agencies, has yet to bring many significant cases against those responsible for the financial crisis. Unlike the heads of companies brought down by the accounting scandals of last decade, the leaders of major financial institutions haven't faced jail time or, by and large, sanction for fueling the subprime mortgage boom, bundling those risky loans into toxic derivative instruments and betting against them or selling insurance against these assets that would pay out handsomely to speculators in the event that one were to fail.

Authorities ended probes of Goldman Sachs and a former American International Group executive without bringing charges over some of their conduct in the financial crisis, and lost others, such as the acquittals of two Bear Stearns hedge fund managers accused of fraud in the run-up to the investment bank’s collapse.

Bharara says he’s not deaf to the frustrations people feel with such outcomes.

"With respect to public discontent, there are few people more deeply aware of that than someone in my position," he said. He’s even heard it from a member of his family who yelled at him at a Christmas party about financial crisis prosecutions.

But he says what’s holding up prosecutions is not a lack of will or a fear of financial giants.

"We have never walked away from a case because we are scared of the level of lawyering, or we’re worried about the stature of the target. We don’t care who you are, how much money you have or who you’re connected to," he said.

Rather, it is a question of evidence to prove, beyond a reasonable doubt, that a crime has occurred. This simple-sounding, even cliched, standard proves to be an enormously high hurdle to leap when unraveling the rights and wrongs of the financial crisis. An opinion by an outside lawyer or accountant whom a bank hired to evaluate a specific deal can be enough to stop an attempt at prosecution years later, Bharara said.

"It becomes, depending on the circumstance, something bordering on an impossibility to prove guilty in a criminal case beyond a reasonable doubt an individual who can hold up in court a legal opinion from a disinterested third-party saying the conduct they engaged in was fine," he said. "Reliance on counsel is still a very robust defense."

Bharara does not doubt misconduct was a factor in the financial crisis, as was negligence, greed, arrogance and stupidity.

But as with any case where infallible proof of criminal intent, in the form of evidence or a witness who will testify, doesn’t materialize, prosecutors will be hard pressed to make a case.

"That’s incredibly frustrating for the prosecutor," he said, "because your job is to hold people accountable for their misconduct."

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