Former Galleon Group hedge fund manager Raj Rajaratnam [JURIST news archive] on Friday agreed to pay approximately USD $1.45 million to settle an ongoing civil lawsuit filed by the Securities and Exchange Commission (SEC) [official website]. After the SEC charged [press release; JURIST report] Rajaratnam with insider trading in 2009, the US District Court for the Southern District of New York [official website] convicted [JURIST report] him in May of 2011 of five counts of conspiracy to commit securities fraud and nine counts of securities fraud. In October 2011 he was sentenced [JURIST report] to 11 years in prison, fined for $10 million and ordered to forfeit an additional $53.8 million to the SEC. While Rajaratnam is in the process of appealing criminal convictions as he serves his sentence, his agreement to settle the concurrent civil suit with the SEC effectively abrogates any right of appeal [Reuters report] and payment must be remitted within a 90 day period. The sum is meant to represent profits gained unfairly from insider trading tips garnered from former Goldman Sachs [official website] director Rajat Gupta [JURIST news archive], who was also convicted of fraud [JURIST report] in June.
Raj Rajaratnam's case has been called the largest hedge fund insider trading case in US history, and his sentence is the longest term ever imposed for insider trading. The 11-year sentence [JURIST report] was significantly lower than the 24 1/2-year sentence requested by prosecutors and less than the 19 1/2-year minimum indicated by the non-obligatory federal sentencing guidelines. Calling his crime an assault on free markets and a virus in business culture in need of eradication, Judge Richard Holwell cited Rajaratnam's charitable financial help for victims of the tsunami in Sri Lanka, the earthquakes in Pakistan and the 9/11 attacks, as well as his impeding kidney failure due to advanced Type II diabetes as reasons for the comparatively lenient sentence. Several other defendants have pleaded guilty in connection with the case. Danielle Chiesi pleaded guilty [JURIST report] in January 2011. Former IBM senior vice president Robert Moffat was sentenced to six months in prison in September 2011 and ordered to pay a $50,000 fine for his role in the scheme after pleading guilty [JURIST reports] in March 2010. Former Intel Capital executive Rajiv Goel pleaded guilty [JURIST report] to insider trading charges in February 2010. Rajaratnam, Chiesi, Goel and Moffat were arrested in October 2009 and charged along with two other individuals and two business entities with insider trading. The complaint alleged that the individuals provided Galleon Group and another hedge fund with material nonpublic information about several corporations upon which the funds traded, generating $25 million in illicit gain.