August 20, 2012
Another notable insider trading prosecution now moves to sentencing
White-collar sentencing fans now have another notable case to follow in the wake of the news this morning reported in this New York Times article, which is headlined "Hedge Fund Manager Found Guilty of Insider Trading." Here are the basics:
After less than a day of deliberations, a federal jury found Doug Whitman of Whitman Capital in Menlo Park, Calif., guilty of earning about $1 million in illegal profits trading technology stocks, including Google and Polycom. Mr. Whitman faces a maximum possible sentence of 25 years in prison. His sentencing is set for Dec. 20....
Of the nearly 70 Wall Street traders and corporate executives charged with insider trading by federal prosecutors in Manhattan over the last three years, virtually all have either pleaded guilty or been found guilty. Juries in Federal District Court in Manhattan have convicted all eight defendants who have taken their cases to trial.
Mr. Whitman, 54, fought the charges, arguing that all of his trades were made in good faith and grounded in legitimate stock research. The defense was similar to the one used by Raj Rajaratnam, the former hedge fund billionaire convicted by a jury last year. Mr. Rajaratnam was at the center of an vast insider trading web that ensnared Mr. Whitman.
Prosecutors in Mr. Whitman’s case relied on the testimony of several main cooperating witnesses, including Roomy Khan, a former trader who was also at the center of Mr. Rajaratnam’s trial. Jurors also heard secretly recorded telephone conversations that prosecutors said showed Mr. Whitman trafficking in confidential information.
In a rare tactic for an insider trading defendant, Mr. Whitman took the stand in his own defense. He testified that he never thought his sources possessed any secret information about the stocks that he traded.
Especially because all the recent insider trading convictions appear to be coming out of the same federal district (SDNY), I think an enterprising sentencing researcher could discover a lot of interesting stories by analyzing in depth the ultimate sentences imposed on the "nearly 70 Wall Street traders and corporate executives charged with insider trading by federal prosecutors in Manhattan over the last three years [who] have either pleaded guilty or been found guilty." I would be especially interested to see what recommended guideline ranges and ultimate sentences were imposed for all the different defendants (and whether and how different offense or offender factors may explain any apparent sentencing disparities).
August 20, 2012 at 02:47 PM | Permalink
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"nearly 70 Wall Street traders and corporate executives charged with insider trading by federal prosecutors in Manhattan over the last three years [who] have either pleaded guilty or been found guilty."
Media typically report guilty pleas and convictions apparently as blanket vindications of the authorities' actions. Consequently citizens remains gleefully ignorant until one by one they discover first hand what a vicious, predatory beast the system has become.
A more accurate report might note instead that given the terrible leverage applied by the government it's difficult to say how many of the 70 succumbed to tactics and plausible threats that made fighting the charges an irrational option...regardless of whether they were innocent, wrongly accused or guilty.
Posted by: John K | Aug 22, 2012 12:12:49 PM
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Posted by: muni arbitrage | Aug 23, 2012 9:06:20 AM