Associated Press, October 14 2011
NEW YORK — A hedge-fund founder once recognized as
one of the country's richest citizens would serve the longest sentence
in history for an insider trading conviction if a federal judge grants
the government's request to send Raj Rajaratnam to prison for two
Rajaratnam's sentencing was scheduled for Thursday in Manhattan.
Prosecutors are asking U.S. District Judge Richard J. Holwell to send
the 54-year-old, one-time billionaire to prison for at least 19Â½ years
for his May conviction on securities fraud charges. They say federal
sentencing guidelines call for a sentence up to 24Â½ years.
The prosecution has placed Rajaratnam's profits from illegal trades
between $70 million and $75 million, saying he moved so much money
around within his multibillion dollar funds that the movement of price
in individual stocks could be traced to his trading whims.
Lawyers for the Sri Lanka native argue that his sentence should be
much lower — 6 1/2 to 9 years — for what they say was illegal profits of
about $7 million, when the trades at his Galleon Group of hedge funds
The defense also has asked for leniency partly based on Rajaratnam's
"failing health" and his "unique constellation of ailments." They say a
lengthy prison term will amount to a death sentence.
The sentencing culminates a series of convictions and sentencings
that followed the October 2008 announcement of the arrest of Rajaratnam
in what prosecutors labeled the biggest hedge fund insider trading case
in U.S. history.
In all, more than two dozen people were arrested. All were convicted
with the sentences ranging from a few months to 10 years.
first arrests, U.S. Attorney Preet Bharara has widened the probe. A year
ago, he said insider trading is "rampant and may even be on the rise."
Using information gleaned from the many cooperators in the Rajaratnam
case, prosecutors have focused lately on consultants who are paid to
arrange conversations between employees of public companies and hedge
fund managers. Too often, prosecutors say, they have found a nest for
insider trading rather than for the discussion of legitimate research.
In their presentence submissions, prosecutors say Rajaratnam lacks
remorse, even after a trial that featured the playing of dozens of taped
conversations in which Rajaratnam was heard discussing financial news
events that were not yet publically known.
"Rajaratnam has neither acknowledged responsibility for his crimes
nor remained silent. Instead, Rajaratnam's post-conviction statements
show that he remains defiant that he never committed insider trading
and, incredibly, he maintains that the line between legal and illegal
conduct was not always clear to him," prosecutors wrote.
They quoted from a report that is not public that he told the
Probation Department: "In my own mind, the line between permissible
'detective work' and impermissible insider trading was not always clear,
especially with regard to companies broadly covered by the news media
as to which there was a wealth of publicly available information,
including frequent leaks, rumors and speculation about corporate
transactions and other important developments."
The prosecutors wrote that Rajaratnam's comments "do not reflect the
proper respect for the jury's verdict, the evidence in the trial record
or the laws against insider trading."
Prosecutors also have asked the judge to force Rajaratnam to reveal
his medical issues since he is relying on them in his plea for leniency.
The judge has not yet ruled on the request. And, in a filing Wednesday,
they asked the judge to revoke Rajaratnam's $100 million bail and force
him to report to prison within three weeks. He currently is confined to
his Manhattan apartment.
In their written submissions, defense lawyers said Rajaratnam should
receive leniency with a sentence substantially below the guidelines
range because of his failing health and his extensive community service.
"Such a sentence would by no means return Mr. Rajaratnam to the life
he enjoyed before his arrest, nor would it exempt Mr. Rajaratnam from a
meaningful loss of liberty. It would simply save him from a loss of
life," the lawyers wrote.
The sentencing comes as the nearly month-old Occupy Wall Street
protests march on, sending daily messages opposing Wall Street greed and
Filmmaker Danny Schechter, who handed out leaflets at the protests
Wednesday calling Wall Street a "crime scene," said the prosecution and
sentencing of Rajaratnam might miss the point. He said prosecutors too
often seem determined to protect investors rather than shield the public
at large and consumers from corporate greed.
He said the larger crime was collusion by corporations, which should be prosecuted as well.
"The government is not doing that," he said.
Associated Press Writer Verena Dobnik contributed to this report.