Raj Rajaratnam – the Galleon hedge fund founder convicted of insider trading on millions of dollars worth of AMD, IBM and other stocks – has been handed an 11-year jail sentence.
Judge Richard Howell of the lower Manhattan court in New York calculated that Rajaratnam had made over $50 million (£32 million) in profits from the trades. This figure includes other trades in Intel, 3Com and Goldman Sachs shares.
Rajaratnam had faced over 20 years in jail, but he escaped a longer sentence because of his diabetes and kidney problems – the details of which were revealed yesterday in court. His lawyers had argued that such time in jail would result in an effective “death sentence” for the 54-year old, given his ill health.
Alongside the sentence of 11 years in jail, Rajaratnam will have to pay a $10 million fine plus $54 million in restitution.
Before Rajaratnam was found guilty by a jury, over 20 people involved in the scam had already pleaded guilty to related charges, including a former McKinsey consultant and a woman who had been a teenage beauty queen.
During the trial, prosecutors played wire-tapped conversations of Rajaratnam discussing company shares with the people alleged to have passed on inside knowledge. Rajaratnam had argued his profits were only the result of effective research, and that he did not break any laws.
As the judge handed down Rajaratnam’s sentence, he condemned the sheer scale at which the trader had illicitly made profit.
“His crimes and the scope of his crimes reflect a virus in our business culture that needs to be eradicated,” he said, adding that the sentence was a “strong and necessary deterrent” to others.
Rajaratnam’s lawyers are expected to appeal the guilty verdict. They have also requested that any jail time he serves be in a medical facility in North Carolina – where Ponzi scheme creator Bernard Madoff is serving his sentence.
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