Wire-tapping could prove very handy in Kenyan courts

By Pravin BowryFrom time to time cases emerge in other jurisdictions, which can and do change the course of law internationally. Terms like hedge funds, insider trading and wire-tapping will begin to have more meaning if the Kenyan courts can be persuaded to follow a recent American precedent- setting criminal case.This week an American of Sri Lankan descent, Raj Rajaratnam, will be sentenced after being found guilty on all 14 counts of conspiracy and securities fraud and he is likely to be imprisoned for up to 25 years.Both factually and on legalities, the case is a mind-boggling one. The billionaire philanthropist, who donated $1 million to help rehabilitate Tamil Tigers and has donated generously to other charities and political causes and even Barack Obama’s party, had a hedge fund valued at mammoth $3.7 billion in 2009, down from a peak of $7b in 2008.His net annualised return was said to be 22.3 per cent. Rajaratnam was featured in the elite US money managers book called The New Investment Superstars.It is interesting to note that after his arrest, his company Galleon, received requests from its clients for the withdrawal of $1.3 billion which were all honoured and investors received their entire money, including profits.In October 2009 Rajaratnam was arrested by FBI and accused of conspiring with others in insider trading in several publicly quoted companies. Prosecutors put total profits from the conspiracies at over $63.8m and the scheme was dubbed as the biggest hedge fund insider trading case in US history.The accused was said to have benefited from insider information from an IBM executive, an Intel Capital executive and McKinsey and Company.The securities fraud case is being watched not just because prosecutors went after one of the top hedge fund managers in the world but because it presented the potential of a new wave of cases aimed at curtailing what is believed to be a very widespread practice of trading on insider information through a secret network of well-informed sources.The success of the prosecution is being attributed to the evidential tool of wire-tapping. It was the series of recorded incriminating conversations of Rajaratnam himself that proved to be his undoing. The prosecutors played 45 wire-tapped telephone conversations between him and his alleged co-conspirators.Wire-tapping requires prior court sanction to circumvent privacy laws, is expensive and thousands of man-hours result before relevant evidence surfaces. The real-time recorded incriminating conversations won the day with the jurors in Rajaratnam’s case.Prosecutors and investigators stand emboldened to pursue more of these and other fraud and money-laundering cases as a result of the case and since the conviction over 21 accused have pleaded guilty to similar offences.Investigative arsenalWire-tapping is likely to be utilised more, given the perceived inability of prosecutors to gain any conviction to date in connection with the financial meltdown by old and orthodox evidential means.Investments in hedge funds have become a source of quick returns and have also promoted criminal activities nationally and internationally.Hedge funds are defined as a limited partnership of investors that uses high risk methods, such as investing with borrowed money, in the hope of realising large capital gains.Usually, only very wealthy individuals and institutions with aggressive strategies unavailable in conventional short leverage markets get involved in these schemes.In Kenya some insight has been witnessed in the failed ‘pyramid’ schemes. Some feel that the funds are in fact banks which operate large mutual funds which are able to change the value of currencies just by predicting what direction the currency will take in the future.The Galleon executive made profits with the help of well-placed tipsters feeding him with illegal stock tips on more than a dozen firms.In Kenya hedge funds and insider trading may well be concepts not in the public domain but there are ample of facts indicating that such schemes are and have been afloat and the collapse of many banks in the last two decades is believed to have been attributed to identical wrong doings by manipulators in the financial world.It would be a fruitful deterrent if wire-tapping is incorporated into our investigative arsenal and accepted in Kenyan courts. —The writer is an Assistant Director with KACC. pbowry@integrity.go.ke

Wire-tapping could prove very handy in Kenyan courts

Get Full Access for Ksh299/Week.

Stand With Bold Journalism.
Stand With The Standard.

Related Topics

Popular this week

Latest Stories

The Standard Insider

Digger Classified

GET OUR NEWSLETTER

CONNECT WITH US

FOR THE LATEST JOB ADVERTS

DIGGER JOBS

Digger Motors

Digger Real Estate

Wire-tapping could prove very handy in Kenyan courts

Get Full Access for Ksh299/Week.

Stand With Bold Journalism. Stand With The Standard.

Related Topics

Trending Now

Popular this week

Latest Stories

The Standard Insider

Digger Classified

GET OUR NEWSLETTER

CONNECT WITH US

FOR THE LATEST JOB ADVERTS

Stand With Bold Journalism.
Stand With The Standard.