Friday, October 23, 2009

Wiretaps & Bug Checks at Galleon

A week ago, Raj Rajaratnam, 52, of the Galleon Group, was arrested for alleged insider trader. Authorities said he made some $20 million on insider trading deals. The billionaire posted bail of a $100 million.

Mr. Rajaratnam says he's innocent. If convicted, he faces 20 years in prison.

The case evolves from FBI wiretaps. At first, it looked like the FBI got court-ordered wiretaps on Galleon's phones. If so, the FBI places the taps in the Central Office of the phone company, and routes the incoming and outgoing calls to FBI headquarters where they are monitored and recorded. If authorities tap the phones from the Central Office, there is no way the wiretap can be detected, even with the most sophisticated equipment. (There is a device sold on the Internet that claims to detect wiretaps downline at the Central Office, but it's claims are bogus.)

When performing wiretap and bug detection we tell people that if they think the Feds are listening to their phone calls we turn down the job. One time the owner of a chain of supermarkets called me. He wanted his office swept for bugs. Then he told me that IRS agents had raided his office the day before, and he thought that they might have left eavesdropping devices behind. I said, "I'm glad you told me that. We can't do the sweep."

Of course, the Feds don't always tap the phones. Sometimes they install electronic transmitting devices where they think they'll pick up something of interest. If you find and remove a government-placed eavesdropping device, you could possibly get charged with obstruction of justice. It's not worth accepting the job.

Now, it looks like a former employee of the Galleon Group got in caught herself for insider trading. When in trouble, some people cast the blame on another person. So, she agreed to work as an FBI informant. Published reports say that she taped four damning phone conversations with Mr. Rajartnam. Originally, I thought the FBI got a court-ordered wiretap on Galleon's phones. Now, it could be that she just installed a simple recorder on her phone, and recorded the conversations with Mr. Rajaratnam.

I always tell people, never say anything on the telephone that you don't want the world to know about. This includes cell phones, too.

Also, it's better not to break the law.


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