Below is a recent article published by Securities Attorney Jake Zamansky on Forbes.com:
The summer was yet another exhausting and painful stretch for investors, with the chaos of the stock market bringing back frightening reminders of the freefall of 2008 and early 2009.
Well, the Dow Jones Industrial Average didn’t shoot up by 500 points on Thursday (in fact, it was down by 41). However, investors may have experienced just a smidgen of relief from the recent high anxiety of Wall Street when a federal judge in Manhattan sentenced former hedge fund titan Raj Rajaratnam to 11 years in jail for insider trading.
Federal prosecutors may be disappointed with the sentence. They wanted more than twice that. Still his sentence is the longest ever for insider trading, and investors should take comfort in that.
Remember, the tentacles of Mr. Rajaratnam’s conspiracy were among the longest in Wall Street’s history, allegedly reaching all the way to the boardroom of storied investment bank Goldman Sachs.
The co-founder of the Galleon Group, Mr. Rajaratnam reached deep into Wall Street’s exclusive enclaves. One of his most powerful allies was allegedly Rajat Gupta, a former director at Goldman who has not been charged with a crime and has denied any wrongdoing.
Indeed, Mr. Rajaratnam’s tentacles wrapped themselves tightly around Wall Street. According to prosecutors, his conspirators and stoolies gave him private, confidential corporate information, and they allegedly included other hedge funds traders, industry consultants and, as we said, corporate directors.
Mr. Rajaratnam, or simply “The Raj” as he became known, was accused by prosecutors of sitting at the center of one of the biggest insider trading schemes ever. Prosecutors went to incredible lengths to nail him and his cronies, using tactics usually reserved for mobsters and drug cartels—such as wiretaps—to build their case.
U.S. District Judge Richard Holwell issued the sentence, which is sending a loud and clear message of deterrence to Wall Street. And we hope the stiff sentence will give investors some comfort that the market can be trusted and is not a rigged game.
“His crimes and the scope of his crimes reflect a virus in our business culture that needs to be eradicated,” Judge Holwell said when he imposed the sentence, according to the Wall Street Journal (subscription required for full story). And The Raj’s crimes did not come cheaply. Judge Holwell also ordered Mr. Rajaratnam to pay a $10 million fine and to forfeit $53.8 million.
Rajaratnam is the highest-profile person to be prosecuted so far as part of a broad U.S. government crackdown, according to the Journal.
Assistant U.S. Attorney Reed Brodsky answered the coward’s call that no one is hurt by insider trading, that insider trading is essentially victimless crime.
“Public companies suffered greatly because their inside information was stolen,” he said during Thursday’s hearing, according to the Journal. Evidence presented at the trial indicated that Rajaratnam illegally profited and avoided losses by trading on inside information concerning blue-chip names such as IBM, Google and Intel. “He is arguably the most egregious insider trader to face sentencing in a courthouse in the U.S.,” Mr. Brodsky said. He called Mr. Rajaratnam the “modern face of insider trading.”
Well said, Mr. Brodsky. Well said, indeed.
Now, after a long hot summer of the stock market’s wild ride, maybe America’s great investing public, that each day strives to save a little bit of their earnings for the kids’ college or their retirement, will rest a little easier with the knowledge that Mr. Rajaratnam and his ilk will spend a long time where they belong: behind bars.
Disclosure: Zamansky & Associates represents investors in arbitrations and state and federal litigation against financial institutions and hedge funds.
Read article on Forbes.com
Jacob ("Jake") H. Zamansky is one of the country’s foremost authorities on securities arbitration law, the legal recourse for investors claiming broker wrongdoing, or for brokers claiming wrongful termination or other misconduct by their employer. Zamansky & Associates, the New York-based law firm he founded, represents both individuals and institutions in complex securities, hedge fund, and employment arbitrations.