Attorney Alexandra Shapiro has a new book out, Presumed Guilty
“Operation Perfect Hedge,” the crackdown on insider trading headed by then-US Attorney Preet Bharara, represented the biggest push to hold someone, anyone, accountable for the financial crisis of 2008. However misguided that prosecution may have been, it provided a look into hedge funds and trading strategies that made multi-millionaires and billionaires. The indictments and trials of those working at these hedge funds made for great drama but behind these cases were real people making decisions to prosecute, to plead guilty or to go to trial. A new fictional account of one such prosecution reads like true crime.
Alexandra Shapiro is one of the top white-collar defense and appellate attorneys in the country. She was one of Justice Ruth Bader Ginsburg's first clerks on the Supreme Court, served as a federal prosecutor in Manhattan, and later founded Shapiro Arato Bach in New York. Shapiro’s new novel, Presumed Guilty, takes you inside the prosecution of Emma Simpson, a fictional character who worked at hedge fund Otis Capital, a fictional company..
Without trying to define a hedge fund, let’s focus on their investment approach, which is based on extreme data accumulation and algorithmic models that trade stocks based on that data. Hedge fund analysts gather information on a publicly traded company that include a deep analysis of the company’s financials, its competitors, its suppliers and its customers. They speak with company insiders, the CEO, CFO and COO. They attend conferences and they share information with other analysts. Hedge funds gather and analyze so much information about a company that they probably know more about the publicly traded company than the company knows about itself. When it comes to handling sensitive information, companies do everything they can to control how and when that information is made public. However, before the news can hit the market, it has to be discussed among a limited number of people in the company. And therein lies the risk for the company to contain the information and the opportunity for someone to act upon it before anyone else knows.
The book clearly reflects Shapiro’s knowledge of the system from her work on many of the high profile cases she has defended in the Southern District of New York, the epicenter for Operation Perfect Hedge . Presumed Guilty provides a realistic view of how insider trading cases are prosecuted by starting with the small fish, usually an analyst, and then moving to the bigger fish, the portfolio managers. Prosecutors, motivated by headlines and aspirations of cashing in on their experience after serving in the government, find the most vulnerable person they believe to be involved in the illegal trade, the conspiracy, and apply pressure. In this case, a trader, Frances O’Brian, is brought in for a proffer to the US Attorneys Office. The proffer session, an opportunity for O’Brian to provide information about to federal investigators about Otis Capital, seemed harmless at first until O’Brian is presented information that he could be in tax trouble because of unreported gambling winnings. O’Brian realizes that there is an opportunity for him to get out of trouble by throwing everyone at Otis under the bus.
Shapiro told me in an interview, “Often the prosecutors use their leverage against people who are not their main targets to get those people to cooperate. Sometimes that leverage even involves collateral crimes, unrelated to the focus of the investigation. This can be a powerful incentive for these witnesses to say what they think the prosecutors want to hear.” That incentive is to avoid prison.
The main character, Emma Simpson, soon finds herself at the center of an investigation not for insider trading, but obstruction related to deleting emails. To Emma it was just part of record keeping management, to the Feds it hinted at a coverup. Emma’s arrest, a dawn raid on her home, the ensuing publicity and a high-profile trial soon consume her life. Shapiro told me, “I tried to capture the personal toll these cases take on defendants and their families. That perspective is rarely reflected in media coverage of these cases.”
A book like Presumed Guilty is good for aspiring business professionals, financial analysts, attorneys and true-crime enthusiasts. It provides a real-life look at the inherent personal risks of working in financial markets and how the criminal justice system can suddenly be knocking at the door. Shapiro brings her characters to life in an easy-to-read storyline that is filled with accurate portrayals of a criminal white collar case.
“Criminal cases are devastating for the defendants once the prosecution starts,” Shapiro said, “and they can go on for years and destroy reputations and personal lives irreparably even in the rare situations where a defendant is ultimately vindicated.”
Summer is coming and Shapiro’s Presumed Guilty is one to add to the reading list this year.
