MANHATTAN (CN) - Billionaire Raj Rajaratnam will spend 11 years in prison for orchestrating a $63 million insider-trading scheme, a federal judge ruled Thursday, citing the hedge fund founder's health problems as a reason the term fell well below the maximum 24 1/2 years.
Rajaratnam will need surgery to address imminent kidney failure caused by diabetes, according to the court. The former executive of the Galleon hedge fund shared his health condition with the court in a brief seeking leniency, which was unsealed today.
When asked if he wanted to speak, Rajaratnam stood and said, "No, thank you, Your Honor."
Attorneys for Rajaratnam said his family was not in the courtroom to avoid intense media scrutiny, though some outlets reported the appearance of Rajaratnam's wife.
Rajaratnam's prison sentence is just one year longer than that given to his former employee Zvi Goffer, one of the 40-plus co-conspirators that played a part in the insider-trading ring.
U.S. District Judge Richard Holwell said that each of Rajaratnam's years in prison will feel longer than that of his former employee.
"Prison provides an intense form of punishment for seriously ill people," Holwell said.
Assistant U.S. Attorney Reed Brodsky called Rajaratnam the "modern face of insider trading."
"Born into privilege," Rajaratnam founded the heavy-hitting Galleon hedge fund, and then became "arguably the most egregious insider trader" to be sentenced in a federal court, Brodsky said.
In 2009, the year of his arrest, Rajaratnam amassed an estimated $1.8 billion, roughly 4 percent of his native Sri Lanka's $41.98 billion gross domestic product.
"Insider trading is thievery," Brodsky said. "It's theft. It's no different from someone stealing from a bank."
A light sentence, Brodsky warned, would reinforce Wall Street's lax view of the crime.
"The incentives to commit this crime are extraordinarily high," he said, citing "increasing pressure for money managers to beat the competition."
Brodsky added that insider trading is difficult for regulators to detect.
"In many cases, the government won't have the resources" to build a case against inside trading, Brodsky said. "It's not surprising it's become all too prevalent."
Though Rajaratnam did not speak, defense attorney Terence Lynam praised his client's "charitable effort [that] goes beyond his ability to write a check," for disaster relief in Sri Lanka, AIDS charities and the Harlem Children's Zone charter school.
Judge Holwell noted that more than 200 people wrote letters to the court on Rajaratnam's behalf.
Noting these charities, the probation department had recommended 15 years - a figure still below the guidelines range.
"Raj Rajaratnam has attempted to make the world a better place," the department said of the future prisoner, convicted of 14 felonies, as quoted by Lynam.
Brodsky countered that poorer defendants do not have the resources to mount this defense.
"Maybe they don't have the ability or resources to provide the court with hundreds of letters," he said.
The probation department still recommended a long sentence because Rajaratnam's crimes confirmed the public's view that "the financial markets are rigged," and that the "decks are stacked against a public" that is "a pawn in a game that operates by secret rules."
Judge Holwell said there was no "crystal ball" that would predict what prison term would be tough enough to deter future inside traders.
Lynam, the defense attorney, said that hedge fund traders already got the message.
"Nobody running a hedge fund would want to trade places with Mr. Rajaratnam, regardless of what sentence you impose," he said.
Rajaratnam is appealing his sentence, hoping to convince the higher court that the wiretaps that incriminated him constitute an unconstitutional invasion of his privacy.
Judge Holwell denied the billionaire bail pending appeal, saying that he will probably not be able to shake off his conviction.
Rajaratnam will report to prison on Nov. 28.
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