The short-story: Reuters got hold of a draft letter from U.S. attorney William J. Ihlenfeld II to justice department officials alleging HSBC had created an anti-money laundering operation that was a "systemically flawed sham paper-product designed solely to make it appear that the Bank has complied."

HSBC staffed its U.S. anti-money laundering unit with "gullible, poorly trained, and otherwise incompetent personnel," the letter alleges, and also ignored thousands of internally generated alerts and failed to forward legally-mandated notifications to law enforcement.

It gets worse. In 2009, the Office of the Comptroller of the Currency determined that the HSBC executive in charge of installing a program to monitor suspicious retail transactions was incompetent. The next year, a Miami-based HSBC banker brought suit against the bank, alleging that he was fired on sexual harassment charges after he warned colleagues that lucrative private bank clients had violated U.S. trade restrictions with Iran and Cuba.

HSBC has been upfront about regulator interest, and told Reuters that it's cooperating with investigations. The lender disclosed in November that it had entered into consent orders regarding its anti money-laundering and Bank Secrecy Act compliance. (Excerpt: "It is likely that there could be some form of formal enforcement action in respect to some or all of the ongoing investigations.")

The devil of the Reuters story, of course, is in the details. In the draft letter reporters obtained, U.S. attorney Ihlenfeld compared HSBC to Riggs Bank, which was fined $41 million in 2004 and 2005 for violating money-laundering laws.

"HSBC is to Riggs, as a nuclear waste dump is to a municipal land fill," wrote Ihlenfeld.

At some point, he might testify. But for now Mr. Rajaratnam was confined to the same spectator's role as the rest of the room. If he was going to be pilloried, he appeared to be suitably fortified. Perhaps he even looked forward to it. He watched as the government's lead prosecutor, Jonathan Streeter, an athletic 43-year-old with salt-and-pepper hair and rectangular glasses, approached a podium in front of the jury box.

"Greed and corruption," Streeter began. "That's what this case is about."

If only it were as simple as that. As Mr. Streeter set about explaining the concept of insider trading, what a hedge fund is and how Mr. Rajaratnam conducted illegal trades "again and again and again," the extent of the challenge faced by the government became clear. For a prosecutor in a case like Mr. Rajaratnam's, the difficulty is in simplification.

For the defense, the job is to complicate. Representing the accused was John Dowd of Washington, D.C.'s 800-lawyer powerhouse, Akin Gump Strauss Hauer & Feld. The bejowled and fearsome ex-Marine's previous clients have included John McCain and Monica Goodling. The cajoling in this trial would come from the defense. He was all avuncular corpulence and honeyed aphorism. Mr. Rajaratnam, he insisted, was an "investment professional." Everybody else the jury would see, he emphasized, was not.

One government informant "is a professional liar who played the government like a violin"; another "would aggressively say anything, even lie to all her friends." None of them were worth trusting. "Each of these witnesses is on a leash, and the prosecutor is at the other end of that leash," he drawled. "The prosecutor holds the key to the jail house for each one them." 

The prosecutor in question is, of course, Mr. Streeter. He has won convictions or guilty pleas for executives accused of accounting fraud, traders who cooked the books, money launderers and insurance fraudsters. He successfully argued against Manhattan attorney Marc Dreier, a con man who trafficked in fake securities. He got a conviction against former Ernst & Young partner James Gansman for insider trading, and against former Duane Reade execs Anthony Cuti and William Tennant for padding their quarterly earnings report.

"He's a very effective prosecutor," said David Siegal, a former assistant US attorney who is now a partner at Haynes and Boone, LLP. "Undoubtedly one of the most effective and experienced trial attorneys in the U.S. attorney's office right now."

Still, none of those cases, or the 130-odd others in which Mr. Streeter has participated during more than a decade as an assistant U.S. attorney, matches up with the Galleon investigation and its current billionaire target.

The trial of Raj Rajaratnam, which began March 8, marks the government's first public reckoning in its widespread crackdown on insider trading. Since U.S. Attorney Preet Bharara took office in August 2009, charges have been filed against 46 people from hedge funds, expert networks, Fortune 500 companies and other financial institutions. Of that number, 29 have pleaded guilty, many of them now acting as government witnesses. The crackdown has ensnared former employees of one of the most prominent hedge funds in the business, Steve Cohen's SAC Capital. Since major F.B.I. raids took place in November 2010, three other hedge funds have shuttered and another is rumored to have suffered more than $1 billion in losses from investor withdrawals. Mr. Bharara said that the Galleon trail "should be a wake-up call for every hedge fund manager and every Wall Street trader and every corporate executive who is even thinking about engaging in insider trading."

The case against Raj Rajaratnam also marks the first time that the government has used wiretaps in such an investigation--the first time, in other words, that Wall Streeters are being treated like suspected drug dealers and mobsters. The profits that the government alleges that Galleon earned through insider trading--$45 million--are just as unprecedented. The list of potential witnesses includes Wall Street titans like Goldman CEO Lloyd Blankfein and its CFO, David Viniar.

"It's remarkable because it's somewhat unusual to have these types of recordings," said former U.S. attorney David N. Kelley, who headed New York's Southern District from 2003 to 2005 and is now a partner at Cahill. The Rajaratnam trial, he said, stands to determine "where the new boundary is going to be drawn in what is proper and improper in the marketplace."

An earnest Midwestern boy with family connections in East Coast prosecution, Mr. Streeter is a classic straight man seemingly born for his role--a bit stiff, but by all accounts a good guy. Born March 4, 1968, in Bronxville, N.Y., he grew up in Cleveland, the youngest of four. His father was an attorney, a vocation that Mr. Streeter's brother Matt says inspired Jonathan early on. As a kid, Jonathan exhibited a special talent for argumentation and what his brother calls a "very, very strong moral compass." On the school bus, a third-grade Jonathan would engage kids two years older than he in level-headed arguments about racism.

After high school, he entered Colgate University, pledged at Beta Theta Pi and then graduated in 1990 with the highest GPA among all history majors in his class. After a year working in an Oregon national park, he entered Northwestern Law School, where he won the school's prestigious moot court argument. He graduated in 1994, then underwent a clerkship out west under Judge Melvin Brunetti in the U.S. Court of Appeals for the Ninth Circuit, and then moved to Washington, D.C., to heavyweight firm Arnold & Porter. In 2000, he joined the U.S. attorney's office in New York's Southern District.

"That angle on things was my uncle, because my father was a corporate lawyer," said Mr. Streeter's brother Matthew. From 1967 to 1968, that uncle, Michael Armstrong, was chief of the securities unit for the Southern District offices. He convicted proto-corporate raider Louis Wolfson in a conspiracy trial that led to the 1969 resignation of Supreme Court Justice Abe Fortas. Mr. Armstrong argued for the Knapp Commission, the 1970s police-corruption investigation spurred by Frank Serpico's testimony.

By the time Mr. Streeter followed his uncle, the Southern District was investigating embassy bombings in Kenya and Tanzania, alleged insider trading by Martha Stewart and accounting fraud by ex-WorldCom CEO Bernie Ebbers.

Like other incoming assistant U.S. attorneys, Mr. Streeter spent a couple of years at the office's general-crimes unit, then narcotics, major crimes and, finally, a spot on the coveted securities-fraud unit.

"We are in a business filled with bantam roosters, and everybody is jealous of everybody," said Mr. Armstrong.

"He's not a showboater," said his brother Matthew. This is in contrast with former barnstorming U.S. attorneys, like Rudy Giuliani, who famously handcuffed Goldman Sachs arbitrageur Robert Freeman, or Eliot Spitzer, who named himself the "Sheriff of Wall Street."

Even facing "belligerent or aggressive attorneys on the other side," Mr. Streeter remains surprisingly calm, said Joshua Goldberg, whose office was next to Mr. Streeter's when they were in the securities-fraud unit together.

A source who
's known him for years says that out of all of his cases, he may have lost one, a drug case. "He won pretty much everything."

"Jon is among a sizable group of AUSAs who have the experience and the talent to handle a case like this," said Mr. Siegal, who worked with Mr. Streeter at the U.S. attorney's office. "The fact that it was assigned to him relates in part to his skill and in part to luck of the draw."

Another factor in Mr. Streeter's rise to prominence is his decade-long resistance to the seductions of white-collar defense. It's a well-established pattern for assistant U.S. attorneys eventually to succumb to the pull of private-sector work, which can triple their salaries. Mr. Streeter was married at 39 and doesn't have kids, and as a result may have been better positioned than others to persist as a prosecutor.

During his tenure in New York, Mr. Streeter has carved out for himself an picturesque Upper West Side existence that verges on the stereotypical. He met his wife, psychotherapist Lisa Borneman, at a 2004 party in Long Island hosted by Greg Blatt. In 2008, the couple hosted 65 guests at their wedding in San Miguel de Allende, Mexico. They currently live on the Upper West Side with their dog, a Labradoodle named Ridley.

Mr. Streeter plays tennis every week with a group of fellow attorneys. He's an accomplished downhill skier. He might have gone down in history as yet another competent bureaucrat had his passion for waterskiing not captivated reporters for The Wall Street Journal, the New York Post and other publications. The devoted owner of a finely tuned competition-level MasterCraft ski boat, Mr. Streeter recently had his picture taken for the March 2011 issue of WaterSki Magazine. He and several fellow enthusiasts took turns slaloming along the Hudson, the Statue of Liberty looking on in the background. According to John Corkery, co-owner at the upstate Twin Lakes Water Ski Park, where Mr. Streeter is a member, the attorney won a few amateur competitions in his chosen discipline, slalom. 

John Dowd, on the other hand, is not a recreational athlete, at least not by appearances. He outweighs Mr. Streeter in nearly every relevant category: He has more than 20 years, 50 pounds and (one supposes) a few million dollars on his legal adversary. He's best known for conducting the Major League Baseball investigation that permanently banned Cincinnati Reds manager Pete Rose from ever getting a mention in the Hall of Fame. He has at his beck and call all the resources of a high-end law firm: six lawyers on his team, innumerable paralegals, PowerPoint designers. He also has the benefit of input by the team of lawyers who have been winding down Galleon, the crowd of very well-dressed Shearman & Sterling attorneys who have been haunting the trial on a near-daily basis.

In his opening statements, Mr. Dowd has made clear his plans to present the government's witnesses as unhinged, money-grubbing fraudsters. The problem, for Mr. Streeter at least, is that some of them might actually be unhinged, money-grubbing fraudsters. Mr. Rajaratnam, said Mr. Dowd, "was generous to a fault; particularly to his friends and former classmates who are now trying to use that generosity to save their skins." If Mr. Streeter is going to make this work, then, he has to paint a different portrait of his co-conspirator witnesses: criminals, yes, but credible criminals.

On the first afternoon of questioning, regret hung heavy over the room. At the witness stand, in a dark suit and inky purple tie with his hands nervously clasped, sat Anil Kumar, former senior partner at McKinsey, now insider trading co-conspirator-turned-government informant. Facing him across the courtroom, Mr. Rajaratnam, his estranged friend, betrayed no emotion over what had passed between them.

In questioning Mr. Kumar, Mr. Streeter worked to lay in the jury's mind the image of a highly intellectual business genius whose aggrieved sense of underappreciation had led him to make some major mistakes. He began with Mr. Kumar's biography--his degrees from the Indian Institute of Technology, the University of London and Wharton, followed by more than 23 years at McKinsey.

With the assistance of Mr. Streeter, Mr. Kumar narrated a Garden of Eden-like seduction, with Mr. Rajaratnam in the role of the snake, at an encounter following a 2003 charitable event. It was there that Mr. Rajaratnam suggested to Mr. Kumar that McKinsey PowerPoints were not really what his firm was interested in. Mr. Kumar said Mr. Rajaratnam encouraged him to think of himself as overworked and underpaid and as having been exiled to open McKinsey's office in India while his colleagues in the U.S. made fortunes. Then he offered him $500,000 a year for his "ideas."

Under Mr. Streeter's questioning, Mr. Kumar told of the Swiss account he then set up and the investment in Galleon he made in the name of his Indian housekeeper. Mr. Streeter provoked Mr. Kumar's palpable remorse when he forced him to recall his misdeeds: "I was actually quite proud," Mr. Kumar said of a deal he helped put together between two companies, "and sadly, I violated everything in sharing it with Mr. Rajaratnam."

But Mr. Streeter also took clear advantage of Mr. Kumar's intellect, the authority of his Anglo-Indian accent, his ability to articulate financial matters in a simple way and his pedagogical manner to ask other kinds of questions as well: What is a hedge fund? What kinds of people invest in them? What is private equity? What kind of hedge fund was Galleon? What does it mean to go short on a stock? Do you know why Bank of Bermuda was being used? The jury watched him attentively. It had been a long day of sitting, but nobody looked bored.

ewitt@observer.com, mtaylor@observer.com

There was plenty of last minute legal maneuvering on the local level, but calls for complaints to be made to the federal authorities apparently went nowhere.

-- Azi Paybarah

They note:

Also worth noting is who specifically sent the message: Jonathan Capehart, a noted advisor to Mike during his campaign.

--Azi Paybarah

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The U.S. Attorney's Office has experienced a much bigger defection to private practice this year than expected.