On Thursday, disgraced billionaire hedge fund manager Raj Rajaratnam was sentenced to 11 years in federal prison for insider trading. Rajaratnam’s sentence represents the longest criminal sentence ever handed out in the United States for insider trading.
Federal prosecutors sought a heftier sentence in the range of 19 to 24 years according to federal sentencing guidelines. Rajaratnam’s lawyers argued for a sentence in the 6 to 8 year range, arguing that insider trading is a victimless crime. Judge Holwell cited a number of factors in mitigating Rajaratnam’s sentence. Among these mitigating factors, Judge Holwell identified Rajaratnam’s financial support of victims of the tsunami in Sri Lanka, Rajaratnam’s native country, victims of the major earthquake in Pakistan several years ago, and his support of victims of the September 11th terrorist attacks. Rajaratanm’s health also factored into the mitigation of his sentence; Rajaratnam suffers from advanced diabetes and kidney failure.
Previously, I wrote on this blog about the unprecedented and first-time use of wiretaps to convict Raj Rajaratnam, the then head of the Galleon Fund. The SEC and federal prosecutors have been very aggressive in their crackdown on “expert networks” and insider trading generally. Raj Rajaratnam’s conviction and sentence marks a growing trend to increase jail time and other penalties meted out to white collar criminals based on the monetary impact of their crimes. Rajaratnam’s sentence sends a stern message that insider trading does not pay. We might never see insider trading come to an end on Wall Street. However, one thing is certain, Wall Street titans will be careful to watch what they say and the conversations that they keep. What are your thoughts? Should Rajaratnam have received the maximum sentence? Is insider trading really a victimless crime?