Preet Bharara’s Latest Obvious, Cosmetic Investigation Into Goldman’s Henry King

Henry King, the Goldman Sachs tech analyst reportedly being investigated for insider trading (a story broken by The Wall Street Journal early Wednesday), of course might not be guilty of what he’s being accused of. But the track record of Preet Bharara, the U.S. attorney charged with policing Wall Street, suggests otherwise. If nothing else, Bharara knows how to crack down on insider trading. That’s been the criticism of the office under his tenure. While we all wait for the prosecutions by his office for the widespread fraud that led to the collapse of the financial markets in 2008, he shows his toughness—“phony toughness,” New York Times columnist Joe Nocera called it—by cracking down on those guilty of lesser crimes. “This Man Is Busting Wall St.,” Time blared on its cover last week for a feature it ran on Bharara. If only.

The significance of this particular prosecution isn’t clear. It “takes the insider-trading investigation inside the research operation of a major Wall Street firm for the first time,” the Journal reports. And of course it’s not just any Wall Street bank, but the one that the public most loves to hate: Goldman. King was responsible for keeping paying clients of Goldman abreast of Taiwan’s big computer makers, including Acer and Foxconn, the controversial assembler of Apple products. And here he is being investigated for leaking insider information to select hedge funds.

But an interesting piece Bloomberg news service posted only a few hours after the Journal’s scoop suggests that such prosecutions are not so rare. Citing confidential sources, Bloomberg’s man in Taipei wrote that in recent years, analysts working out of the Taipei offices of JPMorgan Chase and Lehman Brothers have also been caught sharing confidential manufacturing data for select clients. In a piece written by Tim Culpan, Bloomberg News asserts that it reported back in 2010 that “Taiwan’s black market for business intelligence and its appeal to hedge funds looking for an advantage are well-established.”

While Henry King might be the first person inside Goldman to find himself within Bharara’s sites, he’s not the first Goldman name to surface during this particular U.S. attorney’s investigation of insider trading. In October, Bharara accused Rajat Gupta, who had sat on the board of directors of Goldman Sachs, of passing inside information to Raj Rajaratnam, the hedge-fund billionaire convicted of insider trading in May. Gupta, the former head of McKinsey & Co., one of the country’s top management consulting firms, is slated to stand trial later this spring. As a Goldman director, he made $1 million in cash and stock in 2007 and 2008 alone for just a few weeks of work a year. Yet he is charged with sharing confidential information about Goldman (and Procter & Gamble, where he also served as a director) with Rajaratnam, whose prescient Goldman trades earned him and his clients millions.

It’s a good thing that Bharara’s office is cracking down on these abuses of trust. A few high-profile convictions can go a long way in making insiders reluctant to cash in on inside information for a quick buck. But I’m inclined to side with Charles Ferguson, the documentarian who won the Oscar last year for Inside Job. “Three years after a horrific financial crisis caused by massive fraud,” Ferguson said during his Oscar acceptance speech, “not a single financial executive has gone to jail, and that’s wrong.” Since that time, a few mid-level execs have pled guilty to shenanigans around manipulations of the subprime mortgage market, but mainly the U.S. attorney’s Manhattan office and others in government have come up empty on the prosecutions that would matter most.