Marcus Evans Group | Worldwide Headquarters | American Offices | Latin America | European Offices | African / Asian Offices

‘Defiant’ hedge fund fraudster Raj Rajaratnam could face tougher sentence

Billionaire convicted of illegal stock trading says he is not ‘clear’ what he did was wrong – which may lead to tougher sentence

The hedge fund manager convicted of conducting America’s biggest insider trading scheme has told court officials he isn’t “clear” that what he did was wrong. The admission may lead to an ever harsher sentence, say legal experts.

Raj Rajaratnam, 54, was convicted in May of trading on illegal stock tips. He was the key player in what has become the US authorities’ largest ever insider dealing investigation, using a network of insiders to trade on companies including Google, Goldman Sachs and Hilton Hotels. He will be sentenced on September 27 and prosecutors have called for a sentence of between 19-and-a-half and 24-and-a-half years.

Rajaratnam was interviewed by a court probation officer after his conviction. Such interviews are standard in criminal cases, with the officer writing a memorandum proposing a sentence to the judge. Prosecutors have excerpted some of Rajaratnam’s comments to the probation officer, and they told the sentencing judge, US district judge Richard Holwell, that they show Rajaratnam “remains defiant.”

The Sri Lankan-born billionaire told the court official that he wasn’t “clear” on “the line between permissible ‘detective work’ and impermissible insider trading,” prosecutors said. “I am not aware of anyone who lost money as a result of my actions presented to the jury,” he told the probation official, according to the government. “The trades at issue were made in liquid stocks with market makers. They were not made with individual investors who would have refrained from trading but for my purchases and sales.

“All of Galleon’s investors were made whole after Galleon closed down,” he said.

In court documents, Rajaratnam has called the prosecution’s suggested sentencing “grotesquely severe”, and said they would exceed the average term given to defendants convicted of child pornography offences, manslaughter and robbery.

Prosecutors said Rajaratnam’s comments “reflect a serious disregard for the law” and warrant a severe sentence. In documents sent to the judge, prosecutors said Rajaratnam has “absolutely no appreciation” that he “cheated the system.”

Stuart Slotnick, a former state prosecutor and now white collar crime expert at law firm Buchanan Ingersoll & Rooney, said Rajaratnam’s comments would “absolutely count against him.”

Judges use sentencing guidelines that are influenced by a points system related to the details of a case, said Slotnick. Co-operating with the prosecution subtracts points, while a leadership role in the crime adds points and increases the likelihood of a harsher sentence.

“The guidelines are only advisory, but acceptance of responsibility will be the centrepiece of the prosecution’s argument that he should get a higher sentence,” said Slotnick. “Without question, this is going to make thing a lot worse for him.”

John Coffee, a Columbia Law School professor, said Holwell was a conservative judge unlikely to be swayed by pressure from prosecution or defence. But he said the hedge fund manager could still face 20 years in jail. “Many insider dealing cases are people who stumble over a once-in-a-lifetime opportunity. This fellow was out seeking insiders across Wall Street. He was a professional, doing this professionally.”

Rajaratnam did not testify at the trial, and hasn’t spoken publicly about his conviction or the charges against him. He was under no obligation to speak at the hearing with the probation officer. © 2011 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds