Although he was a lesser character in a scenario starring financial players with outsized egos and enormous, ill-gotten bank accounts, Adam Smith’s saga is nevertheless stunning.
 
Anita Raghavan, author of the new book about insider trading among South Asians, The Billionaire’s Apprentice, writes about Smith, a Harvard Business School graduate, former Morgan Stanley investment banker, and portfolio manager of the Galleon Group hedge fund, (once headed by billionaire Raj Rajaratnam, 56, now serving an 11-year sentence for insider trading):

“More than a year after Rajaratnam’s  arrest, Smith was confronted by criminal authorities after being caught receiving inside information on a wiretap. On July 28 (2010), (the government) picked (Smith) up receiving information from a source in Taiwan who said that Nvidia Corp.’s quarterly revenue would fall short of expectations."

The tip was reliable; Smith sold 100,000 shares of Nvidia the same day, and made a sizable profit.

At the sentencing in 2009 of Rajaratnam, federal Judge Richard J. Holwell said he thought “the crime Rajaratnam was convicted of was endemic. It reflects “a  virus in our business culture that needs to be eradicated. Justice requires a lengthy sentence," Holwell said, as he sentenced Smith’s boss to the “longest sentence ever for an insider trading case."

Raghavan’s book makes a case that insider trading is more than endemic: it’s an epidemic. The new wrinkle is that wire tapping is catching insider trading among the bold and brazen like Smith. But like several others in this precedent-setting investigation (“the Rajaratnam case was the first time prosecutors had ever resorted to wiretaps to snare a white collar defendant," Raghavan writes), Smith cooperated with the government and eluded a prison term.

Less lucky was the book’s other major player -- corporate insider and philanthropist Rajat Gupta, a man admired and respected by colleagues, powerful politicians and world leaders, with four daughters and a wife who adored him. In 2012, the Guptas’ wealth was estimated at $134 million; they had homes in Westport, Conn., and on Central Park West in Manhattan.

Among the boards Gupta sat on was Goldman Sachs’, and before his indictment, he was set to join Kohlberg Kravis Roberts & Co. as a consultant at a annual salary of $5 million.

Gupta, 65, a business partner of Rajaratnam’s in a fund that lost him money, was convicted in June 2012 of insider trading. Prosecutors proved that Gupta regularly leaked information to Rajaratnam after board meetings.

Before passing sentence in October 2012, Federal Judge Jed S. Rakoff said “Mr. Gupta, well knowing his fiduciary responsibilities to Goldman Sachs, brazenly disclosed material, non-public information to Mr. Rajaratnam at the very time, September and October 2008, when our financial institutions were in immense distress, and most in need of stability, repose and trust.

“Gupta’s tipping of Rajaratnam of the $5 billion investment by Warren Buffett (in Goldman Sachs) was the functional equivalent of stabbing Goldman in the back," said Judge Rakoff.  Gupta was sentenced to two years in a federal prison.

Raghavan, a former Wall Street Journal financial reporter, the London Bureau Chief of Forbes, and currently a contributor to The New York Times Dealbook and to Forbes, was born in Malaysia of Indian parents and immigrated to the United States when she was a child. Her immigrant family’s accomplishments are impressive: Raghavan is a graduate of the University of Pennsylvania; her father received his doctorate at Princeton University; her mother completed her librarian internship at the Brooklyn Public Library.

She says she saw the Galleon case as the perfect way to tell the story of "the rise and maturation of the South Asian diaspora in the United States." On both sides of this compelling story -- federal prosecutors and the SEC officials on one side, hedge fund heads and corporate leaders on the other -- are South Asian immigrants who, Raghavan writes, understood that "the path to success in life lay in education."

Leading the investigation were Sanjay Wadhwa, of the SEC, and, United States Attorney Preet Bharara, valedictorian, Class of 1986, at the Ranney School in Tinton Falls, N.J., and a graduate of Harvard University and Columbia Law School.

Once educated (at Harvard, Yale, the Wharton School, et al.) a number of the South Asian financial and corporate leaders began their careers at McKinsey & Company, the oldest consulting firm in the United States, or at the Boston Consulting Group.

Raghavan says these world-traveling South Asians formed global social and professional links, sharing leisure time, meals, trips and high-level seminars as well as inside information. Despite personality differences -- Rajaratnam is described as loud, boisterous and an expensive party giver, while Gupta is reserved, poised and “a man of probity," they shared the need to make money.

"There is no doubt that Gupta, though not immediately profiting from tipping Rajaratnam, viewed it as an avenue to future benefits, opportunities and even excitement," said Judge Rakoff.
 
Enabling the government to make its case were insiders like Smith, and perhaps most painfully, “one of their own," South Asian immigrant Anil Kumar (with a pedigree of Wharton, McKinsey, Galleon). For his “extraordinary" cooperation in helping convict Gupta and Rajaratnam, Kumar received probation.

Returning to India, Kumar was hired as a consultant to a health-care services company doing business with American corporations.
 
“He was back to his old self, regaling (a) friend and his guests about the inordinately long hours he was working," writes Raghavan, with no small amount of irony.
 
The Billionaire’s Apprentice, by Anita Raghavan. Hachette Book Group. $29.