NEW YORK – 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 also was fined $10 million and ordered to forfeit $53.8 million by U.S. District Judge Richard J. Holwell, who said he concluded that Rajaratnam made more than $50 million in profits from his illegal trades.
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“His crimes and the scope of his crimes reflect a virus in our business culture that needs to be eradicated,” Holwell said. “When the integrity of the marketplace is called into question, the public suffers.”
The sentence eclipsed by one year the prison term given to one of Rajaratnam’s co-defendants just weeks ago.
The Sri Lanka-born Rajaratnam, 54, was ordered to report to a yet-to-be-designated prison on Nov. 28. His lawyers asked that he be allowed to report to the medical facility at the Butner Federal Correctional Complex in North Carolina, where Bernard Madoff is serving his 150-year sentence after admitting to a multi-decade pyramid scheme that cheated thousands of people out of billions of dollars.
The judge gave Rajaratnam leniency, citing his need for a kidney transplant and his advanced diabetes. And he credited Rajaratnam’s charitable work, citing his efforts to help victims of the earthquake in Pakistan and Sept. 11, among others.
Asked if he wished to speak, Rajaratnam said only, “No, thank you.” He has been a quiet presence at all of his court proceedings, declining even to sit at the defense table during his trial.
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.
The Rajaratnam investigation relied heavily on the most extensive use of wiretaps ever for a white-collar case, capturing conversations in which Rajaratnam and his co-conspirators could be heard gleefully celebrating their inside information.
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 indulged in since at least the late 1990s as he led one of the world’s largest hedge funds. 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.”
The prosecutor said Rajaratnam went about his crime in a “brazen, pervasive and egregious” manner, corrupting at least 20 fellow traders and at least 16 insiders with a lust for the millions of dollars that can flow to anyone who gets an edge in the securities markets. Brodsky said at least 19 public companies were victims of Rajaratnam’s crimes.
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