Saturday, 30 July 2016
Last updated 4 hours ago
Dec 20 2010 | 10:04am ET
A former Jefferies Group hedge fund manager has been sentenced to six years in prison for insider-trading.
Joseph Contorinis, who ran Jefferies’ Paragon Fund, was convicted of conspiracy and securities fraud in October. He had faced up to 20 years in prison; prosecutors asked U.S. District Judge Richard Sullivan to send him away for as much as a decade.
Sullivan was slightly more lenient, but said he hoped the prison term would “send a message” and make Contorinis a “poster child” for what happens to insider traders. Sullivan is set to preside over the insider-trading trials of Galleon Group founder Raj Rajaratnam and former New Castle Partners executive Danielle Chiesi next year.
While Contorinis’ lawyers told the judge that their client’s “life has been ruined,” prosecutors accused him of lying when testifying in his own defense that he had used an analyst report to make the illegal trades, which netted the fund more than $7 million in illicit profits.
“A message needs to be sent to traders and hedge funds, that you can’t point to analyst reports and paper the file,” Assistant U.S. Attorney Andrew Fish told the court. “People need to understand that when you get caught, they’re going to get punished severely.”
A Manhattan jury found Contorinis guilty of trading on confidential information about the 2006 acquisition of supermarket chain Albertsons. He received the tips from former UBS banker Nicos Stephanou, who served as the key witness against Contorinis.
In addition to trading on the information for the Paragon fund, Contorinis also passed the tip on to family and friends, prosecutors said.
The Contorinis case has come up as part of the Justice Department’s wide-ranging insider-trading investigation. A former SAC Capital Advisors analyst, Jonathan Hollander, was identified in the case as one of four “personal friends” who also received information from Stephanou; prosecutors said Hollander “traded in his personal account and the hedge fund where Hollander worked also traded” on the information, although he has not been accused of any wrongdoing. Hollander gave at least two “proffer statements” as part of the Contorinis investigation.