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January 20, 2011

"Inside-Trading Convicts Avoid Prison Term in 44% of New York Court Cases"

The title of this post is the headline of this notable lengthy new article from Bloomberg News.  Here is how it starts, along with some other stats from the piece:

Almost half of the 43 defendants who were sentenced in Manhattan federal court in the past eight years for insider trading avoided a prison term, with many never seeing the inside of a jail cell because they cooperated with prosecutors.

Nineteen who were sentenced since 2003, or 44 percent, weren’t incarcerated, an analysis of court cases by Bloomberg showed. Of the remainder, the average defendant got a prison term of 18.4 months. The greater the profit made on illegal trades, the longer the sentence. The longest term was 10 years. Danielle Chiesi, who pleaded guilty yesterday for her role in the Galleon Group LLC hedge fund insider-trading scandal, faces between 37 and 46 months in prison.

Since 2009, U.S. Attorney Preet Bharara in Manhattan has stepped up insider-trading prosecutions, charging more than 30 people in three overlapping rings. Of the three defendants sentenced so far in the Galleon ring, the average sentence has been 17 months. The nationwide investigation has implicated hedge funds, technology companies and so-called expert- networking firms....

The average sentence in 7,617 fraud cases in fiscal 2009 was 21.8 months, according to the U.S. Sentencing Commission, which establishes the guidelines. Of those convictions, 94.9 percent were the result of guilty pleas and 5.1 percent came at a trial.

In non-insider trading cases that year, judges in Manhattan federal court sentenced Bernard Madoff to 150 years for masterminding the largest Ponzi scheme ever, former KPMG LLP senior manager John Larson got 10 years for selling tax shelters to wealthy clients, and law firm founder Marc Dreier received a 20-year term for cheating hedge funds out of more than $400 million.

A review of government statements issued since 2003 by the Manhattan U.S. Attorney’s Office in cases in which the chief crime was insider trading showed that many sentences included probation or home confinement. Defendants typically were ordered to pay fines and restitution....

Twenty-eight of the 43 sentences reviewed by Bloomberg occurred in 2007 or later, when prosecutors stepped up their scrutiny of insider trading. In those cases, the average sentence was 17.2 months behind bars.

January 20, 2011 at 11:54 AM | Permalink


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The real question is why anybody gets a prison term for insider trading. What a waste of resources! In the vast majority of cases, these defendants present no ongoing threat to society. The collateral consequences of conviction are a substantial deterrent, in and of themselves.

Practically no one should go to prison for insider trading. It’s a non-violent offense for which there are plenty of available substantial punishments that don’t entail paying the offender’s room and board for many years or decades.

Posted by: Marc Shepherd | Jan 20, 2011 12:05:28 PM


You are kidding right?Sop some one does insider trading and I lose money, or not make as much money as I should have.. Is that not stealing? Wow... is your opinion based on the fact that the majority of these defendants are white males? What a bunch of crock! I would agree with you if they are forced to pay back 3 times what they made. Otherwise there is no deterrent. If I know that all i have to pay is restitution, and some pitiful fine...hurray!!!!

Posted by: james Thomas | Jan 21, 2011 3:05:33 PM

Thank you very much for keeping me up to date.

Posted by: Health Blog | Jan 26, 2011 7:19:10 AM

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