Raj Rajaratnam, the hedge fund billionaire at the center of the largest insider trading scandal in the U.S. has been sentenced to 11 years in prison, the harshest sentence meted out for the crime.
Rajaratnam's sentence brings to a close a prosecution marked by secret wiretaps of Rajaratnam and his partners, in a scandal that shocked much of the investment world.See the Slide Show >>> Insider Trading Scandals
The 54-year-old Rajaratnam, who headed Galleon Management, was convicted in May on 14 counts of conspiracy and securities fraud for illegally using inside information to trade in stocks such as Goldman Sachs, Google, Hilton and Intel. The trading generated profits or avoided losses of $72 million, the government estimated.
"His crimes and the scope of his crimes reflect a virus in our business culture that needs to be eradicated," U.S. District Judge Richard J. Holwell said. "Simple justice requires a lengthy sentence."
Rajaratnam's actions were "brazen, pervasive and egregious," Assistant U.S. Attorney Reed Brodsky said in court on Thursday, urging for the maximum punishment.
Holwell also decried Rajaratnam's offenses, saying "the government is absolutely correct that insider trading is an assault on the free markets that are a fundamental element of our democratic society."
The sentence was lighter than the 19.5 year minimum term that prosecutors had sought, and was only slightly more than the 10 years handed down recently to a former Rajaratnam employee at the now-shuttered Galleon Group hedge fund.
Rajaratnam was ordered to forfeit $53.4 million and pay a fine of $10 million. Currently out on a $100 million bail, Judge Richard Holwell has denied Rajaratnam’s request to remain free on bail while he appeals his conviction, and asked him to report to the federal correctional center on 28 November.
The judge, in rejecting calls for a tougher sentence, said Rajaratnam, faces "imminent kidney failure" due to advanced diabetes. He referred to a report from the defense describing Rajaratnam's doctors as recommending dialysis soon. The report said the doctors had begun the process for obtaining a kidney transplant.
"Prison creates a more intense form of punishment for critically ill prisoners," Judge Richard Holwell said. He added, however, that illness does not provide "a get-out-of-jail-free card."
The judge granted Rajaratnam's request to recommend he be sent to a prison in Butner, North Carolina, best known for housing Ponzi scheme operator Bernard Madoff, who is serving a life term. The prison, whose inmates range from white-collar offenders to child molesters and gang members, has a hospital.
According to a report by First Post,
“The punishment doesn’t fit the crime. Rajaratnam is a victim of prosecutorial overreach,” said an investment banker of Indian heritage, whose firm’s policy does not allow use of his name.
More than 200 letters were written on Rajaratnam’s behalf. He has also found surprisingly vocal support in the blogosphere and in stray media outlets like the Fox Small Business Channel and “The Daily Beast” which noted: