October 13, 2011
"Rajaratnam Is Sentenced to 11 Years"
Somewhat surprisingly, I think, today's high-profile white-collar federal sentencing led to a sentence closer to what the defense sought than what prosecutors wanted. The headline of this post comes from this New York Times account of today's sentencing:
The fallen hedge fund billionaire Raj Rajaratnam received on Thursday the longest-ever prison sentence for insider trading, a watershed moment in the government’s aggressive two-year campaign to root out the illegal exchange of confidential information on Wall Street.
Judge Richard J. Holwell sentenced Mr. Rajaratnam, the former head of the Galleon Group hedge fund, to 11 years in prison. A jury convicted him of securities fraud and conspiracy in May after a two-month trial....
Calling him “the modern face of illegal insider trading,” prosecutors accused Mr. Rajaratnam of using a corrupt network of well-placed tipsters – including former executives of Intel, I.B.M. and the consulting firm McKinsey & Company – to illicitly gain about $64 million.
The 11-year sentence was lower than the range of roughly 19 to 24 years requested by the government. Mr. Rajaratnam’s historic prison sentence continues a trend of ever-stiffer penalties against white-collar criminals. Legal experts say that the increased prison terms are in part a result of federal sentencing guidelines, passed in 1987, which link the length of a sentence to the dollar amount involved in the fraud....
Corporate wrongdoers have received record-long sentences in recent years. Bernard L. Madoff is serving 150 years for cheating investors in an epic Ponzi scheme. Lee B. Farkas, a former mortgage company executive, received 30 years for his role in a $2.9 billion bank-fraud scheme. Last month, Adley H. Abdulwahab, who was convicted of participating in a $100 million fraud scheme that preyed on retirees, was sentenced to 60 years in prison....
John C. Dowd, Mr. Rajaratnam’s lawyer, had asked the judge to impose a sentence closer to six to eight years, calling the government’s request “grotesquely severe.” In arguing for a lesser term, Mr. Dowd pointed out that a stiff penalty for Mr. Rajaratnam would be on par with the average sentences for violent crimes like kidnapping and sexual abuse.
Advocates of more lenient insider-trading sentences also say that the crime does not have any real identifiable victims, whereas other white-collar crimes such as Ponzi schemes or corporate accounting frauds destroy lives and livelihoods....
“One legacy of this case that Wall Street will be more careful about what they say on telephones than they used to be,” said David Siegal, a white-collar defense lawyer and former federal prosecutor at Haynes & Boone.
Mr. Rajaratnam’s lawyers are expected to focus their appeal on attacking the judge’s decision to admit the wiretapped calls as evidence. They will argue, among other things, that Congress has not authorized the use of wiretap surveillance for insider-trading cases. But most lawyers say that the odds of a reversal are low. “An appeals court will show great deference to the trial court judge on this issue,” Mr. Siegal said.
Mr. Rajaratnam must report within 60 days to the Bureau of Prisons, which will assign him to a correctional facility. Until then, he will be confined to his home, a duplex apartment on Sutton Place. With no parole in the federal prison system, he will serve out his entire sentence, though he can get a slight reduction for good behavior.
October 13, 2011 at 11:37 AM | Permalink
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Given the severity of his medical issues, the fact that he is a billionaire susceptible to extortion by other inmates and the white collar nature of the convictions, I suspect that the Bureau of Prisons will assign the defendant to one of its Federal Medical Center prisons, which include such locations as Butner, North Carolina, Rochester, Minnesota, Missouri, Massachusetts, Dallas, Texas and Lexington, Kentucky. I also suspect that given the extraordinary scale of his wealth, the Government will invoke the little-known statute that permits the B.O.P. to compel an inmate to pay the cost of his own confinement, including what are sure to be millions of dollars of medical expenses. I have only seen that statute used once before, on a very wealthy Mafia Don.
Posted by: Jim Gormley | Oct 13, 2011 3:58:46 PM