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.


In Depth

Q&A: Neil Azous Talks Global Macro Investing

Nov 24 2014 | 12:41pm ET

Neil Azous is the founder and managing member of Rareview Macro, an advisory firm...

Lifestyle

Griffin Selling Chicago Apartment

Nov 26 2014 | 11:40am ET

Citadel Investment Group’s Kenneth Griffin is making clear to his estranged wife...

Guest Contributor

Why The Big Money Is Going To Europe

Nov 14 2014 | 6:03am ET

Peer-to-peer lending was invented with the individual investor in mind. But despite...

 

Sponsored Content

    For Hedge Funds, Mastering Data Is Key To Success

    Nov 4 2014 | 9:45am ET

    Data management is important to every business, but for hedge funds, it is critical. FINalternatives recently asked Peter Sanchez, CEO of Northern Trust Hedge Fund Services, how fund managers can deal with the demands of managing data while at the same time remain transparent and abide by operational best practices. Read more…

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

November 2014 Cover

Building a better market

Reg NMS created a huge bifurcation in equity markets and while much of what has followed has been positive, in terms of lower fees and greater liquidity, many traders would like to see the market come...

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.