From Harvard success story to accused insider traderFebruary 9, 2011: 3:20 PM ET
Samir Barai won the admiration of many, having overcome a severe disability to achieve business success. Yesterday, the 39-year old hedge fund manager became just another Harvard MBA charged with a crime.
By John A. Byrne, contributor
(poetsandquants.com) -- When Samir Barai graduated from Harvard Business School in 1999, the world seemed filled with opportunity. It was not only the height of the dot-com boom; the dollars also were falling on MBAs who were taking all kinds of job opportunities, with hedge funds, private equity players, and venture capitalists. Barai went the investment management route, joining Ziff Brothers Investments as an analyst three months after graduation, in August 1999.
Yesterday, the 39-year old hedge fund portfolio manager became just another Harvard MBA charged with a crime. Barai was accused of insider trading by federal prosecutors in New York. Barai, the founder of Barai Capital Management LP, surrendered to authorities early in the morning. The insider-trading charges against him and several others come amid a U.S. crackdown on insider trading that has implicated hedge funds, technology companies and expert networking firms.
The charges seem certain to again revive a debate on whether Harvard Business School does enough to teach its graduates the importance of values and ethics in business. A series of crises -- the dot-com bubble, the Enron scandal and collapse, and the 2008 financial-industry failures and resulting severe recession -- have shaken confidence in business and in the schools that grant the MBA degree.
Many believe that Nitin Nohria was chosen as the new Harvard dean last July largely because of his reputation as an ethics-focused educator. Soon after taking over as dean, Nohria himself posed the core question for the school: "Are we educating people who have the competence and character to exercise leadership in business?"
With this latest embarrassment, that question becomes even more relevant. Of course, Barai is hardly the first MBA from Harvard to be charged with a crime. There's a growing list headed by former Enron President Jeff Skilling, who got his MBA from Harvard in 1979 and was convicted in 2006 of multiple federal felony charges related to the financial collapse of the energy company.
Unlike Skilling, who when asked by an HBS admissions staffer if he was smart reportedly replied "I'm fucking smart," Barai was a self-effacing student who was highly popular with his classmates. His friends describe him as gentle and generous, humble to the point of hiding his accomplishments. Barai's Harvard graduation was something of a special triumph because he was one of the first severely disabled MBA students at the school. Virtually deaf, he had an aid come to each class with him to ensure he was interpreting his professors correctly through a combination of lip reading and a cochlear implant.
He was known for working incredibly hard, beating the odds against him. "All my life, I've had so many chances to fail," Barai said in a 2008 article published in Absolute Return. "But I have always figured out a way to come back. When people say no, I don't fight back. I find another way to do it."
A friend recalls that his high school guidance counselors told him to try for community college because it was probably the best he could get. Instead, he managed to get accepted to New York University's Stern School, where he often sat in the first row of class so he could read the professor's lips. After earning a B.S. in finance, Barai joined Merrill Lynch's investment banking analyst program.
Undaunted, he eventually talked his way into Harvard, even though HBS admissions staff reportedly had concerns about his ability to participate in case study discussions due to his limited hearing. Barai received a cochlear implant just months before he arrived on Harvard's campus, allowing him to hear sounds for the first time in his life.
During his first semester at Harvard, when Barai was still adjusting to his implants, he confessed to feeling adrift. "My brain didn't have the ability to process everything," he once told a reporter, "and the pressure at Harvard was huge because half of class grades are based on participation." At one point during that first fall on campus, he even contemplated giving up. Encouraged by a roommate to stay the course, however, Barsai fought hard to stay. He had speech therapy every day and eventually got through.
After nearly a six-year stint with Ziff as a technology analyst, Barai moved to Citigroup's Tribeca Global Management as managing director for a couple of years, before founding his own firm, Barai Capital, in January of 2008. At his firm, Barai was managing around $100 million in assets.
In 2006, his Indian wedding was an elaborate five-day affair that included an evening boat cruise around Manhattan. Barai wore a Zegna tuxedo with a green tie. The event was written about by New York Magazine. And when he launched his own hedge fund firm, he held a Hindi prayer service to bless the new company.
Authorities alleged Barai and a hedge fund research analyst, Donald Longueuil, sought to conceal their activities by destroying documents, emails and computer records. Manhattan U.S. Attorney Preet Bharara said both Barai and a Longueuil "believed the federal authorities were closing in and systematically set about destroying any and all evidence linking them to the criminal scheme."
Barai's fund was one of four raided by federal agents late last year when the trading probe was heating up. The raids shocked the hedge fund world, and were followed by dozens of subpoenas to hedge funds and mutual funds, including SAC Capital, that did business with various expert network firms and consultants.
Barai was charged with securities fraud, conspiracy and obstruction of justice, according to the court documents. He is accused of engaging in insider trading involving shares of Marvell Technology Group Ltd and Fairchild Semiconductor International Inc.
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