Fallen hedge fund billionaire Raj Rajaratnam was awarded the longest prison sentence ever for insider trading yesterday, following an aggressive government campaign.
Judge Richard J Holwell of Federal District Court in Manhattan sentenced Rajaratnam, 54, the former head of the Galleon Group hedge fund, to 11 years in prison after a jury convicted him of securities fraud and conspiracy in May, following a two-month trial.
''Insider trading is an assault on the free markets,'' said judge Holwell. He added, ''his crimes reflect a virus in our business culture that needs to be eradicated.''
Rajaratnam was also fined $10 million and would forfeit $53.8 million in ill-gotten profits.
The sentence marked a watershed after a two-year push by federal prosecutors, during which period Preet S Bharara, the US attorney in Manhattan, brought charges against 54 people. Of these, 50 have either pleaded guilty or have been convicted at trial. Of the rest, while one is a fugitive, proceedings against three others are pending.
However, many Americans are wondering why charges had not have been pressed against bank executives over their role in the financial crisis, which still weighs heavily on the economy.
In the Galleon case, the government was ready to deploy some rather unconventional means and tactics to build a case, using for the first time in such a case, wiretaps to record traders' telephone conversations.
Traders were forced by federal agents to wear hidden microphones and record their calls to build their cases.
However it remains to be seen whether the use of such methods and stiff penalties would end insider trading but most legal experts think it would have the desired effect.
Meanwhile, the Justice Department has opposed allowing Rajaratnam to stay out of prison while he appealed, on concerns he might flee to his native Sri Lanka or some other country. The government said in a court filing that he ''would have access to tens of millions of dollars by the mere touch of a keystroke.''
Kathryn Holmes Johnson, a spokeswoman for his legal team, said in an email that Rajaratnam would appeal his conviction.
According to an Associated Press report from New York the defense lawyers asked that Rajaratnam be allowed to go to the medical facility at the Butner Federal Correctional Complex in North Carolina. Bernard Madoff, who cheated billions of dollars off thousands of clients with his Ponzi scheme, is serving his 150 years sentence at the complex.
The government said, Rajaratnam used an array of tipsters, to gather inside information about pending corporate deals and earnings announcements. His accomplices included a Goldman Sachs board member, a senior partner at the consulting firm McKinsey & Co and an insider at the Moody's credit rating agency.
Rajaratnam showed no emotion as judge Holwell read his sentence in a packed courtroom.
The Galleon chief, who is of Sri Lankan descent, has not spoken publicly following his arrest in October 2009. He declined to testify at his trial and did not speak at the sentencing.
Judge Holwell considered a number of Rajaratnam's good deeds while imposing his sentence. He cited financial help for victims of the tsunami in Sri Lanka and the 11 September attacks.
He further disclosed that Rajaratnam was suffering from advanced diabetes that was leading to kidney failure, and said prison ''is a more intense experience for people with serious health conditions.''