Interesting battle over guidelines and "gain" in Rajaratnam pre-sentencing hearing

This new New York Law Journal piece, headlined "Financial Gain Hotly Disputed in Galleon Presentence Hearing," provides a great review of some pre-sentencing sparring taking place in the run-up to a high-profile white-collar sentencing schedued for next week. Here are some excerpts:

Prosecutors and defense lawyers were miles apart yesterday as they argued how much financial gain should be attributed to Raj Rajaratnam when Southern District Judge Richard Holwell sends him to prison in the Galleon Group hedge fund scandal.

Special Assistant U.S. Attorney Andrew Z. Michaelson told Judge Holwell that Mr. Rajaratnam was guilty of "serial insider trading" that produced illicit gains of $72 million. That number, if accepted by the judge along with sentencing enhancements for taking a leadership role and obstructing justice, would mean a guidelines sentencing range of 19½ to 24½ years in prison.

But defense lawyer Terence J. Lynam of Akin Gump Strauss Hauer & Feld, one of a half dozen attorneys from Akin Gump who sat with Mr. Rajaratnam, said the government's number vastly exaggerated the alleged profits made by Mr. Rajaratnam and failed to acknowledge the movements in stock prices that were due to market forces or other events....

Yesterday, Mr. Rajaratnam, 54, watched impassively with Akin Gump's John M. Dowd by his side as Mr. Lynam argued against the government's math and the leadership-role enhancement, and co-counsel Samidh Guha argued Mr. Rajaratnam should not be penalized further for allegedly obstructing a probe into insider trading by the Securities and Exchange Commission.

Assistant U.S. Attorney Reed M. Brodsky, who prosecuted the case along with Mr. Michaelson and Jonathan M. Streeter, argued for both enhancements as he called Mr. Rajaratnam "by far and away the clear leader in organizing" a series of "interlocking conspiracies," in which he learned about earnings announcements and corporate transactions and then made millions from the stolen information....

But the bulk of the argument yesterday focused on the amount of the gain, as Mr. Michaelson told the judge that roughly $30 million of the $72 million in gains were racked up through trading ahead of mergers and acquisitions, and another $30 million trading ahead of earnings announcements for entities such as Google and Goldman Sachs. About $10 million came in the form of trading to avoid losses and the remainder came from trades the defense argues cannot be attributed to Mr. Rajaratnam.

Mr. Michaelson was challenged by Mr. Lynam on whether the government's method of calculating gains "sweeps up" other factors affecting stock prices. Mr. Lynam argued that the government should be forced to "back out" the other factors affecting pricing, but Mr. Michaelson said there were no "significant intervening" events that drove the stocks at issue either higher or lower after Mr. Rajaratnam had already placed his bets and the announcement of a merger earnings was made....

Mr. Rajaratnam's defense team is also seeking a break from Judge Holwell because of their client's poor health, but they have yet to publicly reveal his condition and documents relating to the issue remain under seal.