Raj Rajaratnam, once a high-flying billionaire hedge fund maestro but more recently portrayed by prosecutors as the face of insider trading on Wall Street, was sentenced on Thursday to 11 years in federal prison, a tough punishment when compared to some other white-collar sentences but well under what prosecutors had wanted.
The sentence was imposed by Judge Richard Holwell of the Southern District of New York, who presided over the trial that ended last May in Rajaratnam’s conviction on all 14 counts of conspiracy and securities fraud brought by the office of Preet Bharara, the U.S. Attorney for the Southern District.
Prosecutors had asked for a sentence of 19 to 24 years in prison (see Main Justice’s earlier report), despite pleas that a long term could effectively be a life term for the 54-year-old defendant, who has been described by his lawyers as suffering from poor health. The sentence imposed Thursday was the longest ever for insider trading, The New York Times reported.
Rajaratnam’s main defense lawyer, John G. Dowd, had asked for a sentence of 6 to 8 years and had described the government’s recommendations as “grotesquely severe,” The Times noted.
Rajaratnam was “stone-faced” as the judge pronounced sentence, The Times said. Holwell also imposed a fine of $10 million — pocket change in the financial stratosphere where Rajaratnam once dwelled. “Judge Holwell cited Mr. Rajaratnam’s charitable works and his medical problems as reasons to give him a lower sentence than what prosecutors had requested,” The Times said. The defendant is suffering from diabetes and accompanying kidney problems, the judge noted.
“We can only hope that this case will be the wake-up call we said it should be when Mr. Rajaratnam was arrested, ” Bharara said in a statement, according to The Times. “Privileged professionals do not get a free pass to pursue profit through corrupt means.”
Rajaratnam became fabulously wealthy through his Galleon Group hedge fund, yet he apparently hungered for even more money, cultivating a web of sources willing and eager to provide him confidential information, as revealed by tapes played at his trial (see our report).
Prosecutors said he made some $60 million to $70 million via illegal trading. One question is why a man who was worth billions would risk so much for “mere” millions. Implicitly, prosecutors suggested throughout the two-month trial, the answer was simple: He thought he could get away with it. Alas for him, investigators were listening in on many hours of conversations that were ultimately incriminating.
Rajaratnam must report in 45 days to the Bureau of Prisons, which will assign him to a correctional institution, The Times said. Since there is no parole in the federal prison system, he can expect to serve about 9 years 3 months, assuming he gets 15 percent off for good behavior.
“Defense lawyers requested that their client to be sent to the Federal Medical Center in Butner, N.C., part of the federal prison complex where Bernard L. Madoff is serving 150 years for cheating investors,” The Times said.
As for Rajaratnam’s chances on appeal, they are not good, since fewer than 10 percent of federal convictions are overturned, noted Harvard law professor Alan M. Dershowitz, who said Rajaratnam should hire a new legal team for his appeal (see our report).
The Rajaratnam case, which has been described as the biggest insider-trading episode in years, tainted many people who were caught in its web because of their own missteps. Some were themselves convicted, while others pleaded guilty and testified against their erstwhile friend Rajaratnam in hope of leniency.
No one has suggested that Rajaratnam’s crimes are as notorious as those of Madoff, whose enormous Ponzi scheme robbed some investors of their life savings. But the days when Wall Street buccaneers operated with near-impunity, their derring do celebrated even as their wealth was envied, may have vanished as many Americans view their shrinking savings and shrinking job prospects with dismay.
“Often the question is raised, ‘Why shouldn’t crime in the suites be punished as severely as crimes on the streets?’” said Douglas A. Berman, a law professor at Ohio State University who teaches sentencing law and policy, according to The Times. “While that sounds like a sound bite, it’s an important question.”