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Preet Bharara: The enforcer of Wall Street

August 2, 2011, 1:00 PM UTC

The U.S. Attorney for the Southern District of New York developed a sense of right and wrong at a very early age. Which is too bad for Raj Rajaratnam and countless others.

By William D. Cohan, contributor

FORTUNE — When Preet Bharara, the 42-year-old U.S. attorney for the Southern District of New York, was a sophomore at Harvard in 1987, he had a regular gig as a news anchor at the student radio station, 95.3 WHRB. The morning of Oct. 19, he was on the news desk as the Dow Jones industrial average plunged from the opening bell and then collapsed, ending up down 22.6%. Black Monday, as the day became known, was a result of many factors, not least of which were years of wild speculation and greed brought on by a wave of junk-bond-fueled hostile takeovers and rampant insider trading. Bharara and his co-producer were oblivious to those facts and, at first, were also clueless about the import of what was going on. Neither of them owned any stock or had invested in the stock market. Some other story led their news broadcast.

But Bharara kept his eye on the ticker as the market continued to fall and eventually came to the conclusion that something big was happening. Finally, the two students “came to our senses,” Bharara explained in a speech to a group of financial journalists in early June, and decided to lead the news for the rest of the day with the fact that the market had suffered its biggest one-day percentage drop in history. Although his foray into journalism was brief and he ended up in law school — “Even back then, I had a face for radio,” he joked — something clicked for him that day, he told the crowd, about the vicissitudes of the markets and the importance of maintaining their integrity — something, the implication was, that would set him on the career path that today has him making a name for himself in one of the most powerful seats on Wall Street.

The night of the speech, Bharara was fresh off his biggest victory in the nearly 23 months since he’d been sworn in — the May 11 conviction of Raj Rajaratnam, the Sri Lankan–born billionaire hedge fund manager, on all 14 counts of insider trading on which he was charged — and he was feeling confident and expansive, even cocky. He recycled one of his favorite self-deprecating jokes about how his younger brother, Vinit, was the more successful Bharara because he had left his job as a lawyer and started a business that sells diapers over the Internet. After Vinit sold the company, Quidsi (it owns, last year for $540 million to, Bharara recounted, the brothers’ immigrant parents refused to answer the question about which son made them the most proud. “All I know,” Bharara told the crowd, “is it was not until the day that my brother got word that Amazon was buying his company for more than half-a-billion dollars, that my very proud, Indian-American mother got on the phone with Dr. Sanjay Gupta’s mother and said, ‘Eat your heart out.’ ”

The yukking it up that night was a rare break from a nearly two-year span that has been utterly serious. While his crackdown on insider trading has been his highest-profile pelt, Bharara has been on a tear across all aspects of the criminal justice system. Yes, he explained to journalists, his office had charged 49 defendants with insider trading in the 21 months since Rajaratnam had been arrested, and had won guilty pleas or convictions for nearly every one. But he also spent several minutes ticking through a laundry list of victories unrelated to Wall Street, from the convictions of Times Square bomber Faisel Shahzad and multiple corrupt New York politicians to accused arms trafficker Victor Bout, as well as indictments of several online gambling companies — and much, much more. He listed the dozens of accomplishments in a methodical, comprehensive way he had rarely, if ever, done before publicly.

Indeed, the night was remarkable if for no other reason than the level of self-promotion the notoriously private Bharara was engaging in. Of the many defining characteristics that set Bharara apart from his predecessors, the most remarkable may be his dogged insistence on keeping as low a profile as possible. Nearly every conversation with him is off the record. Press conferences are tightly scripted and brief. He carefully scrubs the many speeches he delivers to make sure there is no out-of-place word or sentiment and to ensure each has maximum impact. Amusing and revelatory anecdotes about him, should they bubble up in off-the-record conversations with him or his chief deputy, Boyd Johnson, must be sourced and confirmed elsewhere. Big articles are to be discouraged; if there is no way around them, enormous effort is put into steering the story away from Bharara toward the multiple accomplishments of his team of some 200 prosecutors and his efforts to nurture them. (Reporters who closely cover the Southern District might have found it ironic that in his speech to the financial journalists, Bharara drew a parallel between the work of prosecutors and journalists, saying that while both have “come to be maligned in society,” both “care deeply about justice and truth.”)

But however hard he tries, it’s difficult to keep the adulation at bay. After his office won the conviction of Rajaratnam, Bharara was lauded far and wide. CNN named him one of its “most fascinating people.” The Washington Post described him as the new “Sheriff of Wall Street.” The Huffington Post called him “the scourge of Wall Street” — meaning it as a compliment. The New York Times noted that the verdict confirmed the Southern District of New York was “back” and gave Bharara a heaping dose of the credit. “Mr. Bharara is a charismatic figure who is comfortable in front of cameras, can talk tough, and has a knack for the witty sound bite,” the paper wrote.

An early sense of right and wrong

It’s not hard to see why Bharara is so widely admired. His Horatio Alger-esque story is nearly irresistible. Preetinder S. Bharara was born in Ferozepur, in the northern Punjab region of India. His father was a Sikh and his mother was a Hindu. They lived originally in a region that later became part of Pakistan after the partition of India in 1947; they then moved to the Indian state. (When Bharara married his wife, whose mother was Jewish and whose father was Muslim, he often joked, “Four different families, practicing four different faiths — all compelled to flee half-a-century ago because of their religion. Even when my wife fasts for Yom Kippur, and my father-in-law fasts for Ramadan, I get to stuff my face with samosas all day.”)

In search of a way out of punishing poverty — his father lived for a time in a house without plumbing — Bharara’s parents moved the family to Monmouth County, N.J., when Bharara was 2. They left “everything behind to start life from scratch in the United States,” he has said. His father, a doctor, opened a small medical practice in Asbury Park, the legendary stomping ground of Bruce Springsteen, of whom Bharara has long been a major fan. In his office, Bharara has a picture of Springsteen and his mother together, and he listens to Springsteen at night when he is working late. (He and Johnson attend Springsteen concerts together when they can.) At 12, Bharara became a naturalized U.S. citizen.

By the fourth grade, Bharara’s father had scraped together enough money to send his oldest son to the quirky, idiosyncratic Ranney School, in Tinton Falls, N.J. (actress Kirsten Dunst is also an alum). The school’s founder, Russell G. Ranney, a World War II veteran and an admired educator, was a colorful figure who wore lavender suits and drove around in a turquoise Mercedes — but who ruled the school with an iron fist. Students were required to wear blue blazers and gray flannel pants. It was at Ranney, after reading To Kill a Mockingbird and Inherit the Wind, that Bharara resolved to become a lawyer. By then, he was a huge believer in the American Dream.

One of his favorite teachers there was Barbara Tomlinson, who taught American history and American literature, and was the adviser to the school newspaper when Bharara was its editor. She exposed Bharara to the writing of Kurt Vonnegut — Slaughterhouse Five remains one of his favorite books — and taught him about the importance of clear, succinct writing and being able to edit oneself.

Tomlinson also taught him a lesson in injustice that he talks about to this day. Nearing the end of his senior year, after Bharara had been admitted to Harvard, he discovered that the headmaster had fired Tomlinson for objecting to Ranney’s plan to give the school’s teachers a raise while requiring them to work longer hours, suggesting that wasn’t a raise. When Bharara heard of her firing, he went to her and vowed to take action. “This is terrible,” Tomlinson says he told her. “You’re one of the best teachers in the school — we have to do something. I’ll get the students together. We’ll organize. We’ll protest or something.”

She tried to talk him out of it. He had just been accepted to Harvard, and Ranney, she cautioned, could easily write the school a letter labeling him a troublemaker. She told him not to jeopardize his future for nothing — that she had already lost her job. But Bharara persisted, getting a group of students together to see Ranney in his office. “This was like going to see God in his den,” Tomlinson told Fortune.

The meeting changed nothing — Tomlinson got a new teaching job at a different school and Bharara went off to Harvard. But the injustice of her firing stuck with him. Years later, around August 2009, Tomlinson got a call out of the blue from Bharara’s mother, who wanted to know if she was the same Barbara Tomlinson who had taught her son Preet at Ranney. Then Bharara was on the phone: “Hi Mrs. T., this is Preet, and I’ve just been nominated to be U.S. attorney for the Southern District. I’d like you to come to my swearing-in.” Tomlinson was dumbfounded. “How many people in a position like that would reach back to a high school teacher and say, ‘I’d like you to be there?’ ” she says. “I was very humbled that he would do that.”

Last year Bharara gave the commencement address at the Ranney School to the graduating class of 56 students, including two of his cousins and Jessie Springsteen, Bruce’s daughter. He worked extra-hard on his speech, assuming the Boss would be in attendance. He quoted Oliver Wendell Holmes, the late Supreme Court justice. He quoted Bobby Kennedy. At Ranney, he told the graduating students, “I received the lesson that the fullest life is not spent in merely acquiring material wealth or esoteric knowledge; the fullest life involves a commitment to act also for the benefit of other people.” (Springsteen wasn’t there; his daughter was at an equestrian competition instead.)

Bharara’s outspokenness continued at Harvard. On the first day of classes, he met Viet Dinh, who would go on to become an assistant attorney general under George W. Bush and who many consider to be the father of the Patriot Act (he is also a director of News Corp. (NWSA). After meeting in a government studies class, they spent the entire day and all night — until 9 a.m. the next morning — debating whether the founding fathers believed man to be inherently good or evil. (Only at Harvard.) Dinh says now that he probably took the side of man being evil, while Bharara took the opposing view — “and we’ve been best friends and we haven’t stopped arguing ever since,” Dinh told Fortune. He came away from the discussion impressed by his thoughtful new friend. “He asked questions and tried to find the right answers rather than the converse, which is ask who he is and then therefore derive the answer from there,” Dinh said. “He knows who he is. He knows what his job requires and he calls it the way he sees it. He is as straight as the Nevada Highway is long.”

Stepping stones to the Southern District

From Harvard, Bharara was off to Columbia Law School, from which he graduated in 1993, before heading to work as a summer volunteer in the campaign of Mark Green, who was then running for New York City’s public advocate. Green won the race, and Bharara left for private practice, working as a litigation associate at the law firm Gibson Dunn & Crutcher. Three years later, he jumped to the New York office of another law firm, Swidler Berlin Shereff Friedman. In 2000, Bharara became a prosecutor in the Southern District, where for five years he prosecuted organized crime, narcotics, and securities fraud, among other crimes.

A turn of fate soon came from his friend and fellow Southern District prosecutor Ben Lawsky, now chief of staff to New York’s governor, Andrew Cuomo. Lawsky had previously been chief counsel to New York Sen. Charles Schumer and at the time had been talking to Jeff Berman, the man who replaced him as Schumer’s chief counsel and who himself was leaving for the private sector. The tradition was for Schumer’s chief counsel to find his own replacement before departing (and then to continue to field calls for months from Schumer, who was said to have trouble letting go). Berman wanted to know if Lawsky knew of any young prosecutor in the Southern District who might be interested in being Schumer’s chief counsel. “There’s only one guy I can think of in the entire building,” Lawsky told Berman. Bharara started working for Schumer in February 2005.

As chief counsel to Schumer, who was a leading member of the Senate Judiciary Committee, Bharara led the investigation into the firing of eight U.S. attorneys — which ultimately led to the resignation of Attorney General Alberto Gonzales — and generally won plaudits for his even-handed, nonpartisan, and unflappable approach to the highly controversial episode. Lawsky says he believes Bharara’s humor and congenial manner made him successful in that tough assignment. “He’s the whole package,” Lawsky says. “He’s a very smart lawyer, good prosecutor, but on the Judiciary Committee you need to be able to see both sides of issues and work well, especially with people on both sides of the aisle. Preet is just one of these people who has the ability to get along with anyone.”

In the wake of Obama’s election, the U.S. attorney for the Southern District, Michael Garcia, who was appointed by George W. Bush, announced his resignation. It was Schumer who recommended Bharara — one of his key advisers — to President Obama for the top job in the Southern District in February 2009. The New York Times headline simply said, SCHUMER AIDE IS CONFIRMED AS U.S. ATTORNEY. “I believe Preet Bharara will be one of the most outstanding U.S. attorneys that the Southern District, or any other, has ever had,” Schumer said at the time.

The new sheriff of Wall Street

At each stop along the way, Bharara has managed to impress both his peers and his bosses and to win their confidence, and they have been eager to recommend him repeatedly for positions of increasing power and authority. “He’s always impressed me as a very thoughtful guy,” says Bharara’s friend Brian Benczkowski, former chief of staff to Attorney General Michael Mukasey and now an attorney at Kirkland & Ellis in Washington. “He understands politics, but he’s not somebody who’s political, in my view. He’s not unaware of politics, but I think his compass is more directed at doing the right thing.”

Bharara also gets high marks for his management of the Southern District. “They have a real spring in their step in that office now,” says Bill Burke, the former deputy White House counsel under George W. Bush who has known Bharara for nearly a decade and says Bharara has brought “energy and a natural leadership quality” to the office. “One of the most important things for the assistant U.S. attorneys,” he says, “is to feel like the boss has got their back. Preet trusts in them and believes in them. It has given that office a real boost.”

With the effective use of wiretaps in the Rajaratnam case — a decision that was made prior to Bharara’s taking over the office and required a judge’s approval based on evidence of probable cause — he is credited with instilling a new sense of fear among Wall Street traders of every stripe who can no longer be sure when, or if, law enforcement officials might be listening in. Bharara made that point emphatically when he announced Rajaratnam’s arrest. “We believe this case represents the first time that court-authorized wiretaps have been used to target significant insider trading on Wall Street,” he said in his prepared remarks. “All the defendants charged today were ultimately caught committing their alleged crimes over phones that we were listening to. This aggressive use of wiretaps is important: It shows that we are targeting white-collar insider-trading rings with the same powerful investigative tools that have worked so successfully against the mob and drug cartels.”

Neil Barofksy, who worked with Bharara as a prosecutor in the Southern District and who just completed two years as the special inspector general of the TARP program, says he believes Bharara has changed the rules of the road on Wall Street. “It scared the hell out of people,” he says. “It’s the thinking twice about doing the transaction because there’s so many different potential ways now of getting caught. Your cellphone is not safe. Your instant message isn’t safe. [He] sent a message: ‘Not only are we going to get you, but you’re not going to be able to cover your tracks.’ Preet has really taken advantage of a unique opportunity to use these tools to make a significant difference on how people approach their jobs on Wall Street.”

Others are dubious that the Rajaratnam verdict will change behavior on Wall Street. While conceding the prosecution was a “wake-up call” and representative of a “new era of enhanced enforcement,” Richard Scheff, chairman of the Philadelphia law firm Montgomery McCracken and a former consultant to the assistant secretary of the Treasury for law enforcement in the Clinton administration, says he thought the verdict’s actual impact would be less than expected. “My experience is, people don’t think they’re going to get caught,” he said. “There is significant money to be made — and greed drives behavior.”

The main lingering criticism of Bharara — one that may need resolution before his elevation — is that the new sheriff of Wall Street has brought no criminal or civil cases against the bankers whose actions helped cause and exacerbate the financial crisis. Critics find this unacceptable. “The civil charges that should be brought [against Wall Street] are there screaming out to be brought,” former New York governor and attorney general Eliot Spitzer said on CNN. “And the fact that it hasn’t been done yet is really staggering.” Spitzer was the public voice for a chorus that still echoes privately in homes around the country and outside of Wall Street (and in Inside Job director Charles Ferguson’s plea in his Academy Awards acceptance speech).

The Southern District flatly rejects this assessment. The absence of charges, they say, does not mean the absence of hard work investigating the piles of evidence to see if criminal charges should be brought and if they can be proved beyond a reasonable doubt. Complicating matters is the fact that, by law, the existence of grand jury investigations is to be kept confidential, and prosecutors are not permitted to share evidence that would reveal why an indictment was not sought. Barofsky, for one, is sympathetic to that argument. “I have that same intuitive disgust at the fact that we haven’t seen higher-profile cases,” he told Fortune. “But as a former prosecutor, without seeing the evidence that they saw, it almost could be unfair of me to make a judgment.”

What the future holds

So where does Bharara go from here? The party line is that being U.S. attorney in the Southern District of New York is his dream job and that he won’t use it as a stepping stone to higher office. “Preet loves his job and has no desire to run for public office now or ever,” his senior press adviser, Ellen Davis, said on his behalf after the Rajaratnam verdict. Nevertheless, his friends seem to think he would make a great attorney general or federal judge, perhaps even a Supreme Court Justice. They marvel at his ability to connect with people, and think he would be able to win elective office, even if he has expressed little interest in wanting to mount a political campaign. They also talk about his quite natural desire to one day earn more money. He does, after all, have three children whom he wants to educate the way he was educated. Since he has earned around $150,000 a year in his various public-sector jobs for the past few years, they say he is not immune — when the time comes — to the lure of a partnership in a private law firm, where someone of Bharara’s stature could earn millions a year.

In the meantime, Bharara can be sustained by his knowledge that he is trying valiantly to right injustice — while retaining his sense of humor. Ben Lawsky remembers the day in 2004 when a case he and Bharara had been working on against the Mafia came to a head. Thirty members of the Mafia were arrested on a single morning; Lawsky and Bharara had to negotiate 30 bail packages. As the arrests went down, Bharara, the lead prosecutor, placed calls to mob lawyers representing the criminals. When the secretary answered, he asked to speak to the lawyer involved.

“This is Preet Bharara and Ben Lawsky calling,” he said.

“Pete?” the assistant asked.

“Preet!” Bharara responded.

“Peter? Preeter? Prep?” replied the flummoxed assistant.

Lawsky says this went on and on. Finally, he says, “on the fifth call, the woman picks up, and [Bharara] looks at me with sort of a wry smile and says, ‘Is so-and-so there?’ She says, ‘Yes, who’s calling?’ And he just looks at me, winks, and goes, ‘Ben Lawsky.'”

People who know Bharara well are undoubtedly familiar with his wisecracking ways. But they belie a fierce ambition and an obsession to root out injustice on Wall Street and beyond. Whether his future holds further public office or a shift to the private sector, the “other” Bharara son has already earned himself a place in the history books.

–William D. Cohan is a Fortune contributor and author of Money and Power, a new book on Goldman Sachs.

This article is from the August 15, 2011 issue of Fortune.

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