Billionaire trader sentenced to 11 years
Hedge fund exec profited from insider trading
NEW YORK – Raj Rajaratnam, the hedge fund billionaire at the center of the biggest insider-trading case in U.S. history, was sentenced Thursday to 11 years behind bars – the stiffest punishment ever handed out for the crime.
“His crimes and the scope of his crimes reflect a virus in our business culture that needs to be eradicated,” U.S. District Judge Richard J. Holwell said. “Simple justice requires a lengthy sentence.”
The 54-year-old founder of the Galleon Group hedge fund was also fined $10 million and ordered to forfeit $53.8 million in what the judge said were illicit profits from trading on confidential corporate information.
Prosecutors said Rajaratnam made as much as $75 million in all by cultivating a network of friends, former classmates and other tipsters at various companies and investment firms who supplied him with early word on such things as mergers and earnings announcements. In return, they received kickbacks or a chance to get in on the action.
Among the companies he profited from were Google, IBM, Hilton Hotels, Intel, Advanced Micro Devices and Goldman Sachs.
The sentencing was the last major act in a series of prosecutions that followed Rajaratnam’s arrest in 2009, the same year he was ranked No. 559 by Forbes magazine among the world’s wealthiest billionaires, with a $1.3 billion net worth. More than two dozen people were arrested in the investigation, nicknamed Perfect Hedge, and all were convicted.
The judge called it “an assault on the free markets that are a fundamental element of our democratic society. There may not be readily identifiable victims, but when the playing field is not level, the integrity of the marketplace is called into question and the public suffers.”
Asked at his sentencing if he would like to speak, Rajaratnam responded: “No, thank you, Your Honor.”
The Sri Lanka-born Rajaratnam was ordered to report to a yet-to-be-designated prison Nov. 28. Until then, he must remain confined to his $10 million Manhattan condominium. The judge said Rajaratnam deserved some leniency, noting his poor health and his charitable work in helping the homeless and the victims of Sept. 11 and natural disasters.
Galleon was one of the world’s largest hedge funds before it collapsed in the wake of Rajaratnam’s arrest, and the case against him and his cohorts was one of the most closely watched insider-trading scandals since the Ivan Boesky and Michael Milken cases in the 1980s.