How Past Actions Can Haunt Your Business

At first glance, there appears to be nothing in common between the insider trading scandal that has engulfed Raj Rajaratnam and his Galleon hedge fund and the 2005 refinery explosion that killed 15 workers at a BP oil refinery in Texas City, Texas. But a closer look reveals that there may indeed be interesting parallels, with lessons for all business owners and executives.

A recent article about Galleon reports that the government’s key witness, Roomy Khan, was feeding Mr. Rajaratnam inside information as early as 1998. The authorities pressed charges against Ms. Khan, but not Mr. Rajaratnam, even though according to sources there was evidence clearly linking the two – even back then. Maybe Mr. Rajaratnam was cooperating with the feds, or maybe the feds were still investigating him? Who knows why he got a free pass? No one is talking.

Either way, despite the near miss a decade ago and the prosecution of Ms.Khan, you’d think Mr. Rajaratnam would have understood that even if you’re innocent you can get caught up in a messy prosecutorial dragnet. That understanding would have called for avoiding the appearance of an impropriety, and Mr. Rajaratnam might have made the smart business move to clean up an alleged actual impropriety.  

Did Mr. Rajaratnam take heed? I guess not, because Mr. Rajaratnam is now enmeshed in one of the largest insider trading scandals, and the business he spent twelve years to build placed itself on a life-support system within days of his arrest once Galleon was flooded with investor redemption requests. 

What both BP and Galleon missed out on was the opportunity to learn from the past and clean up their actions. 

Taking a deep dive into self-evaluation requires leaving your ego at the door and looking at business processes with a discerning eye. The failure to periodically audit business processes and practices means that the past behaviors will continue unchecked in a “this is the way we’ve always done it” way. It also means also means you miss out on an opportunity to improve your business and your image -- and it thereby allows the past to continuously haunt you.