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Insider Trading Scandals Dominate Financial Headlines

Warren Buffett admits he erred in not questioning aide implicated in alleged irregularities; Galleon insider-trading trial wraps up first week; another guilty plea in web of indictments following federal sweep


News about the slippery ethics slope of insider trading continued to make headlines last week. Among the coverage:


  • In an incident that may never see the courtroom but nevertheless rocked the investment world, Berkshire Hathaway chairman Warren Buffett last week said his top deputy broke the company’s ethics rules, reportsFortune. David Sokol left Berkshire Hathaway after it was disclosed that he invested in a company that he was pushing Buffett to take over. Sokol has denied any impropriety, saying his departure had nothing to do with the scandal. Speaking at Berkshire-Hathaway’s annual meeting, Buffett said he regrets not pressing Sokol for more information. “He violated our insider-trading rules and he violated the principles I lay out every two years to our managers,” Buffett said, according to BusinessWeek.
  • Jurors ended their first week of deliberations last Friday in the insider-trading trial of billionaire hedge-fund mogul Raj Rajaratnam. The case is the spearhead in a wide range of actions brought by federal authorities, including charges that Rajaratnam, founder of the hedge fund Galleon Group, exploited inside information to earn profits and avoid losses totaling more than $63 million, reports the Wall Street Journal. Rajaratnam says he did nothing wrong and relied on honest market research and information that was already public, according to the Journal.
  • A former portfolio manager at the SAC Capital Advisors hedge fund last week pleaded guilty to conspiracy and securities fraud charges brought in a massive insider-trading probe, reports the Financial Times. Donald Longueuil admitted trading in inside information and destroying a computer flash drive that could have been relevant to the investigation, according to a report from MarketWatch.


With all of the market hub bub that has been going on in recent years, I think some of these top players could take a lesson in ethics. So much of this crisis has been caused by top ranking company officers who have screwed the system to benefit themselves. Thousands if not millions of people have been affected by this crisis and it is an unfortunate one at that. Ethics is something that is missing in todays business world. 


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