Rajaratnam Sentenced To 11 Years In Prison

Oct 13 2011 | 11:51am ET

Galleon Group founder Raj Rajaratnam was sentenced to 11 years in prison for leading one of the largest insider-trading rings in history.

The sentence is the longest ever for insider-trading, but fell far short of the 19½ to 24½ years sought by prosecutors. U.S. District Judge Richard Holwell ordered Rajaratnam to report to prison within 60 days; it is not yet clear where he will serve his sentence. Until he goes to jail, Rajaratnam will remain in home confinement at his Manhattan apartment, as he has done since his arrest and release on $100 million bail.

At the hearing this morning, Holwell indicated that the 54-year-old's ill health was a factor in his decision—Rajaratnam's lawyers, who had pushed for a sentence of between six and eight years, had called the sentence called for by prosecutors "grotesquely severe" and warned it would amount to a death sentence.

For the first time, the judge enumerated some of what's wrong with Rajaratnam's health, information that he sought to keep secret. Holwell said that Rajaratnam is suffering from advanced diabetes and will likely need a kidney transplant.

Rajaratnam was convicted in May of reaping tens of millions of dollars using a web of insiders and other tipsters. His attorneys plan an appeal focusing on the prosecution's use of wiretaps in the trial, a key piece of evidence that was a first for an insider-trading case.

A jury found Rajaratnam guilty of leading one of two insider-trading rings—the other was headed by former Galleon trader Zvi Goffer, who was sentenced to 10 years in prison. Twenty-seven people have been charged in the case, with 22 pleading guilty, four being convicted by a jury and one a fugitive.

During his trial, prosecutors accused Rajaratnam of reaping $63.8 million in illicit profits over a seven-year period. The government went through Rajaratnam's allegedly illegal trades, and heard from several former employees and tipsters who pleaded guilty in the case. The government even called Goldman Sachs CEO Lloyd Blankfein to the stand to testify that information that Rajaratnam allegedly received from Rajat Gupta, the former head of McKinsey & Co. and a former Goldman board member, was confidential and privileged.

The defense, for its part, hammered away at the credibility of the government's star witnesses and tried to show that Rajaratnam was only doing his job while drumming up information, none of which was material and confidential, as defined by the insider-trading statutes.

Following the sentencing, Janice Fedarcyk, FBI Assistant Director in charge of the New York field office, released the following statement: “Raj Rajaratnam is no different from a host of others who falsely attributed impressive investment results to superior research and acumen. In fact, as his trial determined, he relied on—indeed, actively cultivated—insider information. His considerable fortune was built on a clandestine network of corruption and concealment. Raj Rajaratnam did not merely bend the rules; he broke the law. There is a price to pay for that.”


In Depth

Q&A: Brevan Howard’s Charlotte Valeur Talks Strategy

Sep 18 2014 | 11:18am ET

Charlotte Valeur chairs the board of Brevan Howard Credit Catalysts, an LSE listed...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

September 2014 Cover

The London Whale: Rogue risk management

Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.