Two-Year Sentence For Whitman, Found Guilty Of Insider-Trading

Jan 25 2013 | 1:19pm ET

Convicted hedge fund insider-trader Doug Whitman was sentenced to two years in prison yesterday.

Whitman, who was convicted in August of conspiracy and securities fraud, faced up to 20 years in prison, and prosecutors sought five. But even though U.S. District Judge Jed Rakoff had harsh words for the first of the recent insider-trading defendants to testify in their own defense, he ignored sentencing guidelines that called for at least four years and three months in jail.

Rakoff said that Whitman was "basically a decent person." But the plaudits ended there.

"Mr. Whitman was someone who had no compunctions about going across illegal lines that he was very well aware of and excusing them and even bringing those excuses into the courtroom when that served his own interests," Rakoff said of the increasingly indecent-sounding Whitman. The judge added that Whitman was "cavalier and crude in his business dealings even when he wasn't breaking the law," and accused the Whitman Capital founder of perjury.

"I think, frankly, he repeatedly perjured himself," Rakoff said. "I think the evidence was quite overwhelming."

In two days of testimony, Whitman told the jury that he did not trade on material, non-public information, and explained that his understanding of the insider-trading statutes meant it was only illegal to trade on exact numbers received from corporate insiders, and not merely on general information.

In addition to his time behind bars—Rakoff said he would recommend that Whitman be sent to a federal prison in Lompoc, Calif., near Santa Barbara and about four hours south of his Bay Area home—the judge ordered Whitman to forfeit $935,000, imposed a $250,000 fine and sentencing him to one year of supervised release.

Whitman told Rakoff that he was "terribly, terribly sorry" and that "this is something that haunts me today and will for the rest of my life." But lest one thinks that the statement is a long-delayed admission of guilt, one of his lawyers said that Whitman "maintains his innocence and looks forward to vindication on appeal."

Rakoff said Whitman can remain free on bail pending that appeal.

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