It’s not clear what, specifically, this is about, but a JPMorgan (JPM) analyst issued a warning about disgraced hedge fund Galleon back in 2001.
FT: The “call note” on Galleon recounts a meeting between the JPMorgan analyst, who has since left the bank, and a “friend” who was identified as a former colleague of Mr Rajaratnam, at his previous firm, Needham & Co. The analyst credited “one of our managers” for supplying the name of the former associate of Mr Rajaratnam.
The analyst said the former associate offered a “great deal of colour” about Mr Rajaratnam’s activities at Needham. The analyst expressed concerns that the former associate of Mr Rajaratnam “has an axe to grind” but described the meeting as “another indication” that JPMorgan should reduce its allocation to Galleon.
The JPMorgan note alleges that the principals of Galleon “liked to operate in the ‘grey areas'” of the markets. “If these allegations are true, there are some serious issues about business conduct,” the memo said.
We’re curious what these “grey areas” of the market are. Was it merely insider trading? Was it the more front-running stuff?
Even before this, it’s clear that in retrospect there were a lot of red flags, including the not-quite-Madoff-like steadiness of the fund’s returns, as well as its churn.
As this story unfolds, frankly, we’re less inclined to believe that the firm is merely being made an example of. Even if the official charges only total six trades, the actual list of complaints and concerns — which now we know were made by Wall Street peers — suggests there was something wrong and unusual about the way the fund operated.