Bharara Once Jailed Wall Street Pros. Now He Helps Them Avoid Prison
In an exclusive Bloomberg Television interview, former US Attorney Preet Bharara also weighs in on Donald Trump.
(Bloomberg Markets) -- Preet Bharara knows about the worst consequences of bad decisions: disgrace, career ruin and prison. From 2009 through 2017, he was the US attorney for the Southern District of New York, perhaps Wall Street’s fiercest cop. And he knows politics. Bharara is now a partner with New York’s WilmerHale, putting him on the defense side. In an interview with Bloomberg Television’s Sonali Basak in late January, he had some advice for financial pros and thoughts about former and perhaps future president Donald Trump, who fired him as US attorney after he declined to quit. This interview has been edited for clarity and length.
SONALI BASAK: Can mistakes slip into criminal behavior?
PREET BHARARA: Culture is incredibly important to what an institution does, how it meets its bottom line projections, but also how it steers clear of law enforcement actions and Securities and Exchange Commission actions and other enforcement actions. Probably the biggest mistake I’ve seen made, and it happens incrementally over time, not just on one day and overnight, is avoidance of creating a good, principled culture. Whether it’s at a hedge fund or a financial institution or a tech company, bad cultures begin to permeate the place.
For example, at Theranos [the fraudulent blood-testing company] or at the Galleon Group, which is a hedge fund we prosecuted many people at some years ago, if you allow people to have the view that the exclusively important thing is to make money or to have an edge, then you’re going to create a culture in which you’re going to be attracting people who are not just going to be making mistakes. You’re going to be attracting people who think it’s in their interest, and in the firm’s, to break the law to increase the bottom line.
SB: What do you tell students entering the financial industry about catching red flags as they go along?
PB: I would speak almost every year to the entire class at Harvard Business School and other business schools. I would say, “Look, I’m here not to address my words to the statistically likely three or four of you who will one day commit serious securities fraud, although I know who you are.” I’d say, “More importantly, I’m addressing myself to the vast majority of you, the hundreds of others of you who want to do the right thing, who have principles, who have morals, who have integrity. Because here’s what happens again and again.
“There’s going to come a time, a few years from now, you’ll be at a financial institution or a trading firm or some other place, company or institution, and something’s going to feel not right. And you’re going to think the person up the hall, maybe they’re trading on inside information or maybe they’re cooking the books, but something isn’t right.
“The next thing that’ll enter your mind is, ‘Well, what do I know? I’m new. Everyone seems quite nice. I don’t want to rock the boat. I don’t want to make a false allegation. I don’t want to get this other person in trouble, and I don’t want to get in trouble and have people think I’m a troublemaker.’ And then you suppress that impulse that you had. And that’s one of the worst things you can do.”
SB: What was biggest mistake?
PB: As a general matter, when we open an investigation with respect to somebody—you know, because an FBI agent comes to your door, or we ask for your phone, or we issue you a subpoena—there’s a policy of not telling you when we close the case.
Lots of people are in sort of limbo and paralysis, because they know the government is looking at them, law enforcement investigators are examining them, and then quietly the case goes away. But they’re never informed. They’re not given notice. So they can’t make decisions about their life, their job, their property, their marriage, their social relationships, where they want to live. And I now see that in a more direct way, because I represent companies and individuals who are under scrutiny and are being investigated. For the life of me, I can’t figure out why there’s not a better policy in favor of letting targets know when they’re no longer targets.
SB: One criticism of your office is that you went after insider trading but not after the financial executives whose behavior led to the world financial crisis in 2008.
PB: We went after everything we could. I don’t think anybody would suggest that my office, when I was there or even now, was anything less than very aggressive. In fact, most of the criticism we got was for being overly aggressive, and we still get that criticism today. You can only make cases that you can make, where there’s proof beyond a reasonable doubt that you can provide to a unanimous jury who decides in favor of guilt.
SB: I want to switch gears for a little bit here, because you were very famously fired by former President Trump.
PB: I was. Talk about mistakes.
SB: In its cases against him, do you think the government’s own lawyers are making any big mistakes?
PB: By and large, the government has done a very good job. I say this with great respect and deference to the folks, some of whom I know very well at the Department of Justice—I do think that with respect to the Jan. 6 case pending in the DC District Court, that the Department of Justice went too slow. I think, in good conscience and in good faith and understandably, they didn’t want to appear political when they came into office by immediately having a meeting to target the former president of the United States over Jan. 6.
They were legitimately focusing on the individuals who stormed the Capitol, who engaged in the rioting, who engaged in violence, to the tune of hundreds and hundreds of people. And then when the Jan. 6 committee in the Congress started doing its work and had very explosive testimony from a lot of people, most notably Cassidy Hutchinson, it’s my sense, and some of the reporting bears this out, that’s when the Department of Justice got into gear and said, “Wow, we maybe need to very forcefully and aggressively look at the conduct of the former president himself.” But they lost like a year in that delay.
The reason the clock is important is, should Donald Trump win and become the president again, and if these trials have not happened, he has the ability to make them go away. On the Justice Department side, he can direct that they be dismissed or dropped. There’s also an argument that he may be able to pardon himself. And there is certainly the argument that we’re aware of that a sitting president can’t be subject to criminal prosecution until he’s out of office. So if he’s back in office, that stops things. So, it’s that they lost time, and time is of the essence.
SB: You’re on the defense side now. Is there something you find yourself saying more to clients?
PB: I like to learn from other people’s mistakes, right? When you see an enforcement action, whether by the SEC or the DOJ or anyone else, against some other company that’s in your space, even if you don’t have that problem, you should maybe convene a meeting and make sure that you’re not going to be in the same position. Like, really study other people’s mistakes and have discussions about them. And obviously, most importantly, hire very capable counsel.
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