By Andrew Ross Sorkin
When it comes to policing Wall Street, there are two distinct narratives about Preet Bharara’s tenure as the US attorney for the Southern District of New York.
If you think back to the immediate years following the financial crisis of 2008, Bharara, who took office in 2009, was pilloried for coming down far too lightly on bankers. He was accused of letting Wall Street off the hook for misdeeds that helped lead to the crisis, and he was frequently forced to defend the fact that no senior banker of note was prosecuted, let alone convicted, for the actions they took that brought the economy to its knees.
Several years later, another storyline emerged: Bharara had turned into the “Sheriff of Wall Street” by aggressively prosecuting hedge fund managers for insider trading. The New Yorker magazine called him “The Man Who Terrifies Wall Street.” But critics contended that this reputation was, in part, the result of overreaching: As evidence, they pointed to a federal appeals court that overturned two of Bharara’s most prominent insider trading convictions.
Both narratives, which are at odds with each other, misunderstand Bharara.
He is, at his core, a pragmatist—one with a proclivity for publicity.
“If we’re not bringing a certain kind of case, it’s because the evidence is not there—pure and simple,” Bharara said in 2014 in a wide-ranging interview with Worth magazine about why he never prosecuted a bank CEO.
In that article—which is quite revealing and worth rereading—he offered some advice to the Greek chorus of politicians, pundits and others who suggested that he and other prosecutors had abdicated their responsibility by not pressing charges against the big banks or their top executives.
“I would suggest that some of these critics should go to law school and apply themselves and become prosecutors, and make the case that they think we should be making,” Bharara said. “Sometimes there’s frustration, because the things that have happened don’t rise to the level of criminal conduct. People are being jerks and stupid and greedy and negligent, but you can’t pin a criminal case on them.”
His line of thinking was not popular then, nor is it now. A New York Times/CBS News poll in 2013 showed that nearly 8 in 10 Americans felt that “not enough bankers and employees of financial institutions were prosecuted in their roles in the financial crisis.”
That’s not to say that Bharara did not want to be popular or seek out publicity. He very much did—as evidenced by the firestorm he created over the weekend by announcing on Twitter that he had been fired.
A subsequent tweet he posted—“Now I know what the Moreland Commission must have felt like”—was a reference to the New York state anti-corruption commission that was disbanded when it focused on Gov. Andrew M. Cuomo. That tweet raised questions about whether Bharara was hinting that he had an investigation underway into President Donald Trump. Or, to some who read it, perhaps it related to Cuomo.
Others speculated that Bharara—who was once accused in a court filing of being a “petulant rooster”—might be making provocative statements to test the waters for a run for governor of New York.
On Monday, Bharara left his office in what seemed like a staged procession with staff members and others applauding him, as television cameras captured it all.
Whatever the case, Bharara’s publicity efforts have always seemed to be part of a larger strategy.
In the many insider trading cases he brought, which were often heralded with news releases, his goal wasn’t just to win in court, but to scare Wall Street.
“Our efforts are bound to have a substantial deterrent effect on insider trading specifically, and perhaps on corporate corruption generally,” he said in a speech in 2011. “Part of our job is to increase the cost and risk of engaging in illicit conduct.”
Indeed, much of the trading community has lived in fear of Bharara and his office. While it is hard to quantify the effect of his campaign, anecdotally, many firms have tightened up their compliance programs.
Steven A. Cohen, the billionaire hedge fund manager at the center of many of Bharara’s investigations, was never prosecuted, but did pay a record $1.2-billion penalty.
Still, some said Bharara went too far with the cases he brought. An appeals court overturned two insider trading cases, forcing him to seek the dismissals of seven similar convictions, and said his office was using a “doctrinal novelty” to prosecute the cases.
David Ganek, a hedge fund manager whose firm closed after an FBI raid, took the unprecedented step of suing the Justice Department and naming Bharara as a defendant, saying that the warrant supporting the raid “falsely represented” that Ganek was involved in insider trading. The case is still being heard.
Still, critics have suggested he went after small bore. “Hedge funds are safer targets,” Jesse Eisinger, a ProPublica reporter, wrote over the weekend.
“Insider trading cases,” he wrote, “are relatively easy to win and don’t address systemic abuses that helped bring down the financial system.” (His forthcoming book is subtitled, “The Justice Department and Its Failure to Prosecute White-Collar Criminals.”)
Maybe Bharara was just being pragmatic, with his deep understanding and appreciation for what would make news. In the Worth interview, he said, “I have never said that insider trading is the crime of the century. It has not been my personal focus. It’s the focus of the press because there are a lot of wealthy people that like the reporting of it.”
© 2017 The New York Times