Photo: Lipo Ching/Mercury News (Goel); Jemal Countess/Getty (Blankfein); Umesh Goswam/The India Today Group/Getty (Gupta); Jin Lee/Bloomberg via Getty (Rajaratnam, Chiesi); Getty (courtroom); C Squared Studios/Getty (Confidential); Mark Scott/Getty (Money). Illustrations by Gluekit.

On March 19, 2008, at 8 P.M., Raj ­Rajaratnam, the billionaire co-founder of the Galleon Group, one of the world’s largest hedge funds, returned a call from his friend Rajiv Goel, an executive at ­Intel, the giant ­computer-chip maker. After a minute or two of good-ol’-boy banter, the conversation turned to business.

“Accha,” Goel said—Hindi for “listen up.” “I was supposed to meet ­Sriram”—­Intel vice-president Sriram Viswanathan—­“today. I didn’t. I got tired today, so I came home a little early. We had a meeting—in fact he was wondering where the hell I was. But we should be meeting tomorrow. I’ll tell you, the Sprint thing is not happening in the short term. OK?”

Rajaratnam was terse, noncommittal. “Uh-huh.” He seemed to want more.

“Uh—there—there’s a meeting—there’s a board meeting,” Goel said. “Intel has a board meeting, in fact, today. Yeah, today. Uh, and, it’s not happening to—today at the board meeting. That much I—I can tell you.”

“OK, sir.” Rajaratnam was done, on to the next call. “Thank you.”

The FBI was listening, and the next day, Goel came through. “Yesterday our board approved this deal,” he told ­Rajaratnam. Four days later, Rajaratnam purchased 125,800 shares in a telecommunications company called Clearwire. Two days after that, reports surfaced of a possible 4G phone venture between Clearwire and Sprint, a deal made possible because of a $1 billion capital infusion—from Intel. And two years later, on February 8, 2010, Goel became the tenth person to plead guilty in what’s now known as the Galleon case—the 23-defendant probe of an alleged $45 million network of insider trading, implicating executives from Moody’s, ­McKinsey, and Goldman Sachs and featuring testimony from Goldman CEO Lloyd Blankfein. Prosecutors flipped Goel, and last month he took the witness stand in the ongoing trial against Rajaratnam, who stands accused of being the biggest insider trader in the history of Wall Street—bigger than Michael Milken or Ivan Boesky. In handing down the indictment, the U.S. Attorney for the Southern District of New York, Preet Bharara, invoked the ghosts of the last great era of excess: “Greed,” he said, “sometimes, is not good.”

Bharara and the Galleon case say much about the state of Wall Street justice—or the lack of it—today. Working in the tradition of the last sheriff of Wall Street, ­Eliot Spitzer, and out of the same Southern District office where Rudy Giuliani went after Milken and Boesky, Bharara has made a name for himself as the crusader of the moment against white-collar crime. In less than two years on the job, the 42-year-old India-born Bharara has charged 46 defendants with insider-­trading offenses and procured 30 guilty pleas. The Galleon case is the crown jewel of his work to date. And yet …

To collect those scalps, Bharara has, some say, played rough. He doesn’t grandstand or steamroll the way Giuliani or Spitzer did—in fact, he maintains an assiduously, perhaps even cannily, low profile—but he’s by no means shy about pursuing his marks. To build his cases, he’s used unusually aggressive investigative methods for white-­collar crimes, like wiretaps and search warrants. “It’s not that wiretaps hadn’t been used before, but never in this broad a sweep,” says one prominent white-collar defense lawyer and former Southern District attorney. “A lot of these highfliers never would have imagined that someone would be listening in on their calls. He’s got everyone scared.” Where Giuliani hauled bankers from the trading floors and Spitzer browbeat companies into settlements, Bharara has treated the public to the spectacle of Fortune 500 executives turned like mob stool pigeons, a Goldman director calling Rajaratnam seconds after sitting in on a confidential phone call with Blankfein, and one hedge-fund executive allegedly trying to chew to bits the SIM. card of his prepaid cell phone.

But hovering above all of this is the question of whether Bharara is fighting the right war. Three years after Lehman Brothers collapsed, no one responsible for the greatest financial calamity since the Great Depression has gone to jail, and a meaningful remedy for the transgressions of 2008 clearly isn’t forthcoming from Congress or the White House. Bharara may be winning his share of insider-trading battles, but unlike Giuliani or Spitzer, he doesn’t seem to be hauling in the biggest bad guys of his time. Whatever satisfaction comes from seeing Rajaratnam and company squirm, and possibly go to jail, there is still a sinking feeling that they’re only the most expedient, not the biggest, targets. “Preet’s smart,” says one friend and fellow prosecutor. “White-collar cases are difficult. The one area where they’re less difficult is insider-­trading cases.”

For more than a month now, in a wood-­paneled courtroom on the seventeenth floor of the federal courthouse at St. Andrews Plaza, jurors have been listening intently as John Streeter, the athletic Southern District prosecutor employed by Bharara, has sparred with John Dowd, the well-­connected Washington defense lawyer representing Rajaratnam. Each, in his way, is a practiced jury charmer. “Greed and corruption,” Streeter said in his opening statement. “That’s what this case is about.” Dowd has had some choice words for the colleagues and associates of his client who are now testifying against him: “Each of these witnesses is on a leash, and the prosecutor is at the other end of that leash.”

Photo: Stephen Yang/Bloomberg/Getty

Dowd and his team have relied on the so-called mosaic defense—the idea that today’s sophisticated investors don’t trade on any one piece of information from a single source but on a million little bits of information from multiple sources. Whatever Rajaratnam heard from his alleged tipsters, his lawyers say, was inevitably similar to rumors that had been circulating in the financial media. Rajaratnam was simply conducting aggressive research, and nothing he did hurt other investors (to secure a conviction, Bharara’s team must prove that harm was done). “It is legal to trade stock, and the law does not place a person’s liberty at risk simply because he trades in the company’s stock while knowing something about the company,” Dowd has argued.

Streeter, meanwhile, has brought out a litany of witnesses, including one former Galleon Group employee, each telling some version of the same story: that Rajaratnam had positioned Galleon to procure and deploy inside information from a variety of tipsters, some of them paid. The most-talked-about witness was Blankfein. Compelled to testify after a friend of Rajaratnam’s, former Goldman director Rajat Gupta, was shown to have called Rajaratnam just after finishing a conference call with Blankfein, the Goldman CEO confirmed that Gupta had violated the bank’s confidentiality policy in revealing information spoken about on the call.

The prosecution’s main weapon, however, has been the taped phone calls showing Rajaratnam and Galleon employees scouring the world for information. “I’m dead if this leaks,” Danielle Chiesi, another hedge-fund contact of Rajaratnam’s eventually flipped by prosecutors, says in one phone transcript. “I’ll be like Martha fucking Stewart.” Whether the content of the conversations proves criminality will be for the jury to decide, but their tone is clearly damning. “These people are talking about using disposable cell phones and how so-and-so may be wearing a wire,” says Stephen Bainbridge, a UCLA law and business professor. “It’s not at all clear that they thought what they were doing was legal. It looks like there was some hubris here. They just thought they were too smart, too rich, to be taken down.”

The Galleon wiretaps were under way before Bharara started as U.S. Attorney, but he actively embraced the case, and it was he who announced on October 16, 2009, that Rajaratnam had been arrested. Bharara, who lives a quiet suburban life with his wife and three children, always wanted to be a trial lawyer. He was born in Ferozepur, India, and came to America two years later; while his father had grown up without plumbing and was the first member of his family to go to college, Bharara, naturalized at 12, had a comfortable middle-class childhood in a liberal enclave of Monmouth County, New Jersey. He went to private school, and graduated from Harvard magna cum laude. “He was a deep thinker,” says Viet Dinh, a close friend from that time, who went on to become the Washington lawyer who authored the USA Patriot Act. “He does not try to score points through technicalities. He tries to understand the argument.”

After Columbia Law School and several years of white-­collar defense work at Gibson Dunn and another firm, Bharara joined the Southern District as an assistant U.S. Attorney in 2000. For five years, he specialized in organized-crime cases, using warrants and wiretaps against the Gambino and Colombo crime families. Then he moved to Washington to become chief counsel to Chuck Schumer in the Senate, where he led the congressional probe into Bush Attorney General Alberto Gonzales’s firings of eight U.S. Attorneys. He won a reputation for being aggressive but decent. “I will always be grateful to Preet for being fair to me,” says one highly placed Republican DOJ official he questioned directly. “And I didn’t even know the guy.”

When Schumer nominated Bharara for U.S. Attorney in the Southern District in the summer of 2009, Bharara gained attention for his light touch and sense of humor. “Dang, do you have to be a citizen to get this job?” he’s said to have joked during his White House interview. Under Michael Garcia and then–acting chief Lev Dassin, the Southern District office had been in, if not a fallow period, a quiet stretch. Bharara embarked on a drastic reorganization, bringing a new focus to white-collar work—with a special emphasis on the use of warrants and wiretaps. His deputy, Boyd Johnson III, and chief of the criminal division, Richard Zabel, had narcotics and crime backgrounds, like Bharara, and Bharara appointed as chiefs two prosecutors with experience going after drug cartels and the Mafia.

As an outgrowth of the Galleon case, Bharara began prosecuting members of so-called expert networks, ­executives of public companies who are paid on the side to deliver insight into their own companies—insight Bharara contends is at times just thinly veiled inside information. He has investigated expert networks like Primary Global Research and Broadband Research and investment funds that patronized them like Citadel Asset Management, Janus Capital Group, Wellington Management, MFS Investment Management, and Steven Cohen’s $12.8 billion SAC Capital. Working with Bharara’s office, the FBI learned of alleged tipsters listening to conference calls in which ­corporate-earnings information was discussed before it was made public; on the hedge-fund side, they saw people keeping their inside information hidden on flash drives. By February, a number of the funds whose names made news reports went out of business, and Bharara went after traders and analysts who allegedly destroyed evidence and began frantically calling friends. Two former SAC employees, Donald Longueuil and Noah Freeman, were indicted, as well as research analyst Jason Pflaum and hedge-fund founder Samir Barai, who investigators say sent one text that read “shred as much as u can.”

Add the Southern District’s recent string of non–Wall Street coups—one of the biggest ­Medicaid-fraud cases in history, plus a run of public-corruption cases including Mayor Bloomberg’s embarrassing CityTime scandal and the busts of state senators Hiram Monserrate and Carl Kruger—and Bharara seems to have packed a lifetime of blockbuster cases into just twenty months. “They’ve come back to life,” says Spitzer (himself a onetime victim of a Southern District investigation). “Clearly, Preet said, ‘Guys, the secondary role the Southern District has played in recent years isn’t doing us or the people justice.’ ”

Last fall, Bharara appeared at a panel discussion for white-collar lawyers moderated by his old boss, Mary Jo White, now a partner at Debevoise & Plimpton (“Thank you, Dr. Frankenstein,” he said to her at the start). At the end of his remarks, Bharara mentioned a report in the morning’s paper that his law-enforcement counterparts in Great Britain, desperate to stop insider trading, were ordering the taping of traders’ mobile-phone calls.

“There isn’t such a rule in the United States, is there?” White asked.

“There is not,” Bharara said.

White turned to another panelist, SEC enforcement Chief Robert Khuzami—also a former prosecutor in the Southern District. “And Rob—will there be?”

A long pause.

“Umm,” Khuzami said. “I probably can’t comment on that.”

The room erupted in laughter.

“That was helpful,” White said. More laughs.

Then Bharara grabbed the microphone again. “Look, it is something that not only we are thinking about, not only other law-enforcement agencies in the United States are thinking about but also other countries are thinking about,” he said. “And it is only, I think, logical.”

Bharara considers such tough tactics a necessary tool for the times. Given the near-infinite supply of publicly available financial data, he has said, “it becomes easier for people to argue in retrospect that the reason for the trade was based on a public report. Even if it was never read. Even if it was never believed. Even if it was clear that it was not true.” In October, he told the New York City Bar Association, “It does not take a rocket scientist to understand that it would be helpful to have the actual recording of the communication.”

Bharara’s critics counter that wiretaps are costly (one estimate puts the Galleon investigation at northward of $1.5 million) and that warrants that lead to searches can generate headlines that can destroy whole companies before anyone makes it to court. “A prosecutor has the power to do tremendous harm to innocent people without even indicting them,” Bainbridge says. Before Bharara, veteran Southern District prosecutors say, many insider-trading ­cases were directed to the SEC or overlooked. Now, some say, too many are being treated as criminal matters. “It’s gotten totally out of control,” says a senior Southern District alum now on the defense side. “I don’t think insider trading’s the crime of the century, and we didn’t treat it that way when I was prosecuting it.”

But by far the most far-­reaching complaint is that today’s ­insider-trading perpetrators are not the true villains of the era. Those people, the Dick Fulds and Hank Greenbergs of the world, may not be prosecutable. Taking on reckless levels of risk or pushing sketchy credit-default swaps on an unsuspecting public may be deplorable, but it’s not necessarily against the law. Bharara’s harshest critics accuse him of pandering—catering to the public’s unsated hunger for justice. “I suspect the Madoff scandal, the housing crisis, and the credit ­crisis all led the prosecutor’s office to think they ought to take a look at Wall Street,” says Bainbridge. “And when they started digging around and seeing these expert networks, I’m confident they said, ‘We really need to clean up this area.’ But the fact that it was politically advantageous was certainly the icing on the cake.”

Bharara has acknowledged that the financial meltdown plays a part in what motivates him. “We have aggressively pursued fraud whenever and wherever we have found it,” he said in October. “And we do not intend to stop or slow down—especially now, with the economy down, public frustration up, and epic frauds surfacing with increasing frequency.” But then, what else can he do? What other choice does he have? “The media and Congress and members of the public want the scalps of financial bigwigs,” says Daniel Richman, a professor at Columbia Law School and former assistant U.S. Attorney in the Southern District. “And this isn’t that. But this seems to be taken as a substitute for that, at least for now.”