x Abu Dhabi, UAEFriday 21 July 2017

11 years jail for Galleon co-founder Raj Rajaratnam

Raj Rajaratnam was sentenced to 11 years in prison and must pay a $10m fine in a Manhattan court.

Rajaratnam, 54, a US citizen, was arrested in 2009 and convicted on the basis of telephone conversations recorded by the FBI. AP Photo
Rajaratnam, 54, a US citizen, was arrested in 2009 and convicted on the basis of telephone conversations recorded by the FBI. AP Photo

Raj Rajaratnam, a former hedge fund manager who co-founded Galleon Group, was sentenced to 11 years in prison and ordered to pay a US$10 million (Dh36.7m) fine in federal court in Manhattan yesterday for conspiracy and securities fraud.

He was convicted of 14 charges in May in the biggest insider trading scandal seen on Wall Street since the 1980s.

"Raj Rajaratnam's criminal conduct was brazen, arrogant, harmful and pervasive," the assistant US attorneys Jonathan Streeter, Reed Brodsky and Andrew Michaelson said in court papers. "He corrupted old friends. He corrupted subordinates. He corrupted entire markets. Day after day, month after month, year after year, Rajaratnam operated as a billion-dollar force of deception and corruption on Wall Street."

Rajaratnam, 54, a US citizen, was arrested in 2009 and convicted on the basis of telephone conversations recorded by the FBI.

Before handing down the sentence, Judge Richard Holwell said Rajaratnam made up to $100m from trading with insider information.

The Galleon trial is the second major criminal scandal to hit Wall Street since the beginning of the global financial crisis in 2008. But it was eclipsed by the 150-year prison sentence handed down to Bernard Madoff for masterminding a $65 billion Ponzi scheme.

Rajaratnam's trial has been seized upon by critics of capitalism, many of whom are taking part in the Occupy Wall Street protests that spread to London yesterday.

Having bemoaned his portrayal as a "poster-child for every wrongful act that has ever been associated with Wall Street", lawyers for Rajaratnam had pointed to a "degenerative" illness in their appeal for a shorter sentence. The judge said he suffered from diabetes.

"Any significant term of incarceration would seriously threaten his wellbeing and be life-threatening," his lawyers had argued.

Rajaratnam has been hospitalised several times this year, a defence lawyer said yesterday.

The judge said he considered Rajaratnam's need for kidney transplant surgery in the sentence.

Prosecutors had appealed for a sentence of up to 24 and a half years. Prior to Rajaratnam's sentencing, the longest prison term for insider trading was 10 years.

Among the evidence cited by prosecutors were trades made ahead of an acquisition in October 2008 by Mubadala Development, a strategic investment company owned by the Abu Dhabi Government, of shares in Advanced Micro Devices (AMD), a chip maker.

The scandal forced the resignation of Rajat Gupta, the former global head of McKinsey & Co, a consultancy, from a number of the boards, including Goldman Sachs and Procter & Gamble.

The US securities and exchange commission dropped an administrative proceeding against Mr Gupta in August, though the regulator left the door open to pursuing further civil charges against him.

ghunter@thenational.ae