Emmanuel Dunand/AFP/Getty Images
Raj Rajaratnam left court in May after he was convicted of fraud and conspiracy charges in New York.
Raj Rajaratnam left court in May after he was convicted of fraud and conspiracy charges in New York. Emmanuel Dunand/AFP/Getty Images
A former billionaire described by the government as "the modern face of illegal insider trading" was sentenced Thursday to 11 years in prison, the longest insider-trading sentence ever but far short of the two decades sought by prosecutors.
Galleon Group founder Raj Rajaratnam, 54, also was fined $10 million by U.S. District Judge Richard J. Holwell, who said he concluded that Rajaratnam made well over $50 million in profits from his illegal trades.
"His crimes and the scope of his crimes reflect a virus in our business culture that needs to be eradicated," Holwell said.
The judge gave Rajaratnam leniency, citing his need for a kidney transplant and his advanced diabetes. He also credited Rajaratnam's charity work, which he called "the defendant's responsiveness to and care for the less privileged." The judge cited Rajaratnam's work to help victims of the earthquake in Pakistan and the Sept. 11 attacks.
Asked if he wished to speak at his sentencing, the Sri Lanka-born Rajaratnam said only, "No, thank you."
The sentencing culminates a series of convictions and sentencings that followed the October 2009 announcement of Rajaratnam's arrest. More than two dozen people were arrested; all were convicted. The other defendants got sentences ranging from a few months to 10 years.
Assistant U.S. Attorney Reed Brodsky told Holwell before the sentence was announced that Rajaratnam made up to $75 million in illegal profits from insider trading he had indulged in since at least the late 1990s. The government has said he switched so much money around within his multibillion-dollar funds that the movement of price in individual stocks could be traced to his trading whims.
"Today you sentence a man who is the modern face of illegal insider trading," Brodsky told Holwell. "He is arguably the most egregious insider trader to face sentencing in a courthouse in the United States."
Prosecutors had asked Holwell to send Rajaratnam to prison for at least 19 1/2 years for his May conviction on securities fraud charges. They said federal sentencing guidelines called for up to 24 1/2 years. A probation department report recommended a 15-year sentence.
But, they said, the sentence was no slap on the wrist either.
"In the pantheon of insider-trading sentences, this is certainly among the most severe," prosecutor Robert Mintz said.
The defense asked for leniency partly based on Rajaratnam's "failing health" and his "unique constellation of ailments."
Attorney Terence Lynam told Holwell that Rajaratnam should receive credit for his considerable charitable works, and he urged compassion for his illnesses.
"Any lengthy term of imprisonment will surely shorten his life," he said. "Based on the conduct for which he was convicted, he does not deserve to die in prison."
His lawyers argued for 6 1/2 to nine years. They said the illegal profits actually total around $7 million, when the trades at his Galleon Group are disregarded.
Mintz said the judge clearly hoped to send a message with the sentence.
"I think what he tried to do was come up with something he thought was fair given the individual circumstances of this defendant," he said, "but also an acknowledgment that a signal had to be sent here to others that might be contemplating considering a similar crime."
The case against Rajaratnam was based on the testimony of some of his accomplices, but also on numerous wiretapped phone conversations. Columbia University Law School professor Dan Richman says the use of wiretaps suggests how far the government is willing to go to pursue insider trading.
"Straightforward insider-trading cases are something the government is ready and eager to bring," he said, "and it will resort to many of the same tactics that were used in organized crime or corruption cases."
Despite the evidence against him, Rajaratnam never acknowledged any responsibility for his crimes. He argued in a pre-sentencing report that there is a thin line between seeking inside information and conducting legitimate research into a stock's prospects. But prosecutors said the evidence suggested he knew all too well that his actions were illegal.
One witness said that in exchange for tips, Rajaratnam had paid him a half-million dollars through an offshore account in his housekeeper's name.
Rajaratnam asked Holwell to postpone his jail sentence until an appeal is heard, but the judge ordered him to report to prison officials on Nov. 28. He is expected to be sent to the same North Carolina facility where Bernard Madoff is now serving a life sentence.
NPR's Jim Zarroli contributed to this report, which contains material from The Associated Press