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@ WSJ: Insider Trading Is A Crime

January 19, 2010

An article from the most recent Weekend Edition of the Wall Street Journal featured, just below the front-page fold, a story entitled Wired on Wall Street: Trader Betrays a Friend (subs. req) which reveals – for the first time – the identity of Wall Street careerist-turned-informant David Slaine: “Mr. Slaine’s identity as an informant is being revealed by the Wall Street Journal for the first time.” According to the article, Mr. Slaine’s participation in the investigation helped government investigators to build a case against white-collar criminals connected with the ring of Raj Rajaratnam and specifically his former friend Craig Drimal. Having recently watched Matt Damon’s hilarious turn in The Informant!, I anticipated a story of idiosyncratic hijinks with all the bad guys ending up in jail and so read on.

Continuing my reading, however, it became clear that while the article revealed Mr. Slaine’s identity it also revealed a surprisingly lax attitude toward the crime of insider trading on the part of the Journal. Start with the title’s second half, “Trader Betrays a Friend. The verb ‘betray,’ with its forceful negative connotation, makes it seem like Mr. Slaine is the bad guy. The article goes down hill from there. Later: “Mr. Slaine’s saga demonstrates how the U.S. has used Wall Street players to go undercover and turn on their colleagues.” Sans implicit condemnation of Slaine’s assistance in support of justice: Mr. Slaine’s saga demonstrates how Wall Street players have gone undercover in support of government investigation of white-collar criminals and helped the investigators build cases against said criminals.”

For the next dozen paragraphs, the article devolves into a hit piece, describing not only Mr. Slaine’s professional career but also certain incidents that reflect poorly on Mr. Slaine (punching a partner in the face while they were in a steamroom) while being only tangentially relevant to the crimes that should form the hear of the article (to be clear, Mr. Slaine seems to be quite a jerk, but at least he helped the investigators). The rest of the article goes through the specific moments when Slaine wore a wire and what was said during his conversations with Craig Drimal, the trader he ultimately brought down.

Insider trading is may appear to be an ambiguous crime; while the traders’ actions are plainly unfair, they don’t seem to be stealing from anyone. The truth is, however, that they are stealing from the public as a whole. Using their insider information, they make trades that other investors – possibly you, your money manager, your pension fund, your state’s public employee pension fund – can’t make and thereby prevent those investors from gaining value that they legally and morally should have a chance to acquire. Criminals turn on each other – it’s part and parcel of their line of work. It would be unimaginable for the Wall Street Journal to report a story on a Mafia informant with the same implicit condemnation of the person who has helped bring about justice but, fundamentally, both the Mafia and insider traders are criminals and should be treated as such. The Wall Street Journal doesn’t get this.

3 Comments leave one →
  1. January 19, 2010 11:32 am

    While total;y agreeing with you that inside trading is a serious offence, iIthink that it is not an ambiguous crime.It is out right unambiguous crime for more than the money involved it the trust these people betray

  2. Somerset permalink*
    January 19, 2010 11:39 am

    You’re absolutely right. I’ve edited my post to reflect your point and better capture what I really should have said. Insider trading isn’t as simple as holding up a gas station but it is still an unambiguous crime, as you’ve said.

  3. January 19, 2010 11:49 am

    This con game is going on in India by Major companies with active connivance of politicians.
    An IT major Sathyam computers(ranked Third in India in IT )had swindled crores from whatever possible accounting loop holes available .For details of this fraud you may see my blog,underIT/Finance.

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