Political India: Engaging America

Raj Rajaratnam (54), the billionaire hedge fund manager convicted in May on 14 counts of securities fraud and conspiracy, was handed a 11-year jail term by a Manhattan court on Thursday, said to be the longest sentence imposed for insider trading in New York in twenty years.

Although the prosecution in the two-year case had pushed for a maximum jail term of over 24 years, the Sri- Lankan born boss of the Galleon Group had pleaded for a lenient sentence arguing that given his health problems a long prison term would amount to a “death sentence.”

While conceding that Mr. Rajaratnam’s ill health justified some leniency in sentencing, U.S. District Judge Richard Holwell took on board the arguments of the prosecution that as the “modern face of illegal insider trading,” Mr. Rajaratnam had made over $64 million through his illicit network informants.

However Judge Holwell did refer to Mr. Rajaratnam’s health condition, noting that he was suffering from advanced diabetes and was likely to require a kidney transplant. During the trial Mr.Rajaratnam reportedly missed a courtroom session after undergoing emergency surgery for a bacterial infection in his foot, according to a statement at the time, and he was said to have made “several court appearances this spring wearing a walking boot on his foot.”

Mr. Rajaratnam’s sentencing comes in the wake of other senior officials being charged with crimes relating to insider trading, including Anil Kumar of consulting firm McKinsey and Company, Rajiv Goel, Managing Director at Intel Capital, Robert Moffat, a Senior Vice President at IBM and Danielle Chiesi, a portfolio manager at New Castle Funds, a New York hedge fund.

Recent weeks also saw the sentencing of some of Mr. Rajaratnam’s associates including Emanuel Goffer, who was sentenced to three years in prison for bribing officials of a law firm for insider information; and trader Michael Kimelman, who was sentenced to two-and-a-half years in prison on a similar conviction.

Mr. Rajaratnam’s defence attempted to argue that prosecutors were overstating the amount of illegal profits that he made from the exchange of material non-public information, specifically arguing that Mr. Rajaratnam made “only $7.4 million” from insider trading and such illicit market activities. They pleaded for no more than six to eight years.

The 11-year term for Rajaratnam however marks a clear victory for the U.S. Attorney’s office in New York which, led by Preet Bharara, has taken an aggressive approach towards insider trading during the last two years. Speaking at a recent event at Wharton Business School, from which Mr. Rajaratnam graduated in 1983, Mr. Bharara noted that his office and the Securities and Exchange Commission had together taken down 52 individuals on insider trading charges over the last two years. “Forty-nine of those have pleaded guilty or been convicted by a jury,” according to reports.

Mr. Bharara has however repeatedly underscored that insider trading continued to be “rampant,” and has said that these individuals were “creating a business model for a stable of insider sources... [and it] has been distressing.”

Labels: Galleon founder, hedge funds, insider trading, Raj Rajaratnam

Raj Rajaratnam (54), the billionaire hedge fund manager convicted in May on 14 counts of securities fraud and conspiracy, this week faces a range of possible jail terms from 19 years and seven months to 24 years and six months as per recommendations of prosecutors in the case against him in New York.

Prior to sentencing, which will occur on October 13, prosecutors pressed for a longer jail term given current federal sentencing guidelines and the “historic nature of his crimes,” from which they alleged Mr. Rajaratnam made in excess of $70 million.

However, according to his own legal team the Sri-Lankan born boss of the Galleon Group allegedly made “only $7.4 million” from insider trading and such illicit market activities. They pleaded for no more than six to eight years.

In particular Terence Lynam, Mr Rajaratnam’s attorney was said to have argued that the government was “sweeping in all market movements,” and that they disputed the government’s calculation of the profits that Mr. Rajaratnam made.

Specifically the prosecution’s methodology included “trades that were made after the time when the news of earnings or a takeover was announced,” reports said, noting that in some instances, Mr Rajaratnam “did not sell his entire stake on the day of the news.”

Yet according to reports if the judge’s request to assume Mr. Rajaratnam sold his entire position on the day of the news was followed then his total profits still exceeded $50m. “Under the sentencing guidelines, one threshold for gains is $50m to $100m, so that change would not alter the government’s sentencing recommendation,” reports said.

Instead, prosecutors argued, Mr. Rajaratnam ought to serve between 235 and 293 months, or a minimum sentence of 19 years and seven months, based on the fact that he was a “serial insider trader” who headed a major conspiracy and obstructed the government’s investigation during an interview with the Securities and Exchange Commission.

Labels: Galleon founder, insider trading, Raj Rajaratnam