May 12, 2011
What insider trading sentence for Raj Rajaratnam would avoid "unwarranted" disparity?
I had not been following closely the trial of Raj Rajaratnam, but the conviction of the founder of the Galleon Group on all counts of insider trading (basics reported here) now turns the case into a interesting federal sentencing story. And this new Reuters piece, headlined "Factbox: Prison sentences in insider trading cases," prompts the question in the title of this post. Here are the facts reported by Reuters:
The Galleon Group founder could face up to 25 years in prison when he is sentenced in July, although prosecutors said on Wednesday that [Raj Rajaratnam] could get 15-1/2 to 19-1/2 years in prison under federal sentencing guidelines. Following is a list of punishments meted out to defendants in other high-profile insider trading cases:
IVAN BOESKY -- Boesky, the famed Wall Street stock speculator of the 1980s, was sentenced to three years in prison in 1987 after pleading guilty to a criminal charge related to insider trading. Boesky, who faced a maximum penalty of five years, cooperated with prosecutors in their probe of trading firms that resulted in charges against more than a dozen people.
MARK KURLAND, ROBERT MOFFAT AND ALI HARIRI -- All three pleaded guilty in the sweeping Galleon probe. Kurland, a former senior managing director at New Castle Funds LLC, was sentenced in May 2010 to two years and three months in prison. Kurland admitted to trading on information he got from Danielle Chiesi, also a former New Castle employee who became a central figure in the Galleon investigation. Chiesi has pleaded guilty and is awaiting sentencing. Moffat, a former International Business Machines Corp executive, was sentenced to six months in prison for tipping Chiesi about an impending IBM deal with Advanced Micro Devices Inc. Hariri, a former executive at chipmaker Atheros Communications Inc. received an 18-month sentence in November for tipping a former Galleon employee.
SAM WAKSAL -- The founder of biotechnology company ImClone Systems Inc. was sentenced to seven years in prison after pleading guilty to insider trading in 2002. The scandal also ensnared Waksal's father as well as lifestyle entrepreneur Martha Stewart, who was convicted of lying to federal agents about her sale of ImClone stock. She served five months in prison.
JOSEPH NACCHIO -- Nacchio, the former CEO of Qwest Communications, was sentenced to six years in prison, later reduced by two months, after he was convicted in a 2007 trial of 19 counts of insider trading in selling $52 million in Qwest stock. A judge also ordered Nacchio to forfeit $44.6 million and pay a $19 million fine.
JOSEPH CONTORINIS -- Contorinis, a former hedge fund manager, received a 6-year sentence in December for his role in providing tips on impending mergers, such as the 2006 buyout of the supermarket chain Albertsons Inc.
HAFIZ NASEEM -- A judge sentenced Naseem, a former Credit Suisse Group investment banker, to 10 years in prison after he was found guilty in February 2008 of participating in a $7.5 million scheme to leak inside information about pending corporate deals.
RANDI AND CHRISTOPHER COLLOTTA -- Randi Collotta, a former Morgan Stanley lawyer, received a sentence of 60 days in prison on nights and weekends for passing along tips to her husband about impending merger deals. Her husband, Christopher, got a sentence of 6 months' home confinement.
So, based on this (incomplete) list, it appears that nobody has received more than a decade for insider trading and that sentences of six year or much less are more common for this crime. Does this entail that the sentencing judges in Raj Rajaratnam's case ought to feel a special statutory obligation to impose a below-guideline sentence based on Congress's instruction in 18 USC 3553(a)(6) to consider at sentencing "the need to avoid unwarranted sentence disparities among defendants with similar records who have been found guilty of similar conduct"?
May 12, 2011 at 10:13 AM | Permalink
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18 USC 3553 (a) (6) was not meant to lock a jurist into "compounding an error" on a previous case that had been wrongly decided.
Posted by: mjs | May 13, 2011 11:48:33 AM