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 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. "When the integrity of the marketplace is called into question, the public suffers."
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 fraud 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 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 Sept. 11, among others.
Asked if he wished to speak, Rajaratnam said only, "No thank you." He has been a quiet presence at all his court proceedings, declining even to sit at the defense table during his trial. When he stepped off the elevator on the floor of his courtroom Thursday, he was carrying a water bottle and casually asked no one in particular: "Which way?"
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.
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The probe 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. He said at least 19 public companies were victims of his crimes.
"The duration of his crimes was extraordinary," Brodsky said.
Prosecutors had asked Holwell to send Rajaratnam to prison for at least 19½ years for his May conviction on securities fraud charges. They said federal sentencing guidelines called for up to 24½ years. A Probation Department report recommended a 15-year sentence.
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."
Lawyers for the Sri Lanka native argued for 6½ to 9 years. They said the illegal profits actually total around $7 million, when the trades at his Galleon Group are disregarded.
In a statement, U.S. Attorney Preet Bharara recalled telling an audience when he announced charges against Rajaratnam two years ago that the case was a wake-up call for Wall Street.
"We can only hope that this case will be the wake-up call we said it should be," he said in the statement Thursday. "It is a sad conclusion to what once seemed to be a glittering story. ... Privileged professionals do not get a free pass to pursue profit through corrupt means."
In another statement, FBI Assistant Director-in-Charge Janice K. Fedarcyk said Rajaratnam was no different from so many others who claim "superior research and acumen" gave them superior results in the stock markets.
"In fact, as his trial determined, he relied on — indeed, actively cultivated — insider information. His considerable fortune was built on a clandestine network of corruption and concealment," she said.
