(CN) – The Second Circuit Court of Appeals affirmed a $93 million civil penalty against Galleon Group founder Raj Rajaratnam.
Rajaratnam argued on appeal that the district court made a legal error in its assessment of civil penalties levied against him, claiming he did not personally profit from his insider trading activities.
In 2011, Rajaratnam was convicted on five counts of conspiracy to commit insider trading and nine counts of securities fraud involving the stock of multiple companies. He also unsuccessfully appealed his criminal sentence.
The appeals court ruling states that the district court’s calculations found that Rajaratnam’s insider trading activities netted $53.8 million dollars for the Galleon Group.
In its action against Rajaratnam, the SEC pushed for the maximum penalty allowed arguing “that such a penalty was warranted because Rajaratnam orchestrated a multi-year campaign of insider trading, corrupted numerous corporate insiders, and had taken highly deliberate steps to evade detection,” Judge Gerard E. Lynch’s ruling states.
“The SEC emphasized that the high-profile nature of this case would afford the district court ‘a truly unique opportunity to send as strong a message as possible to the investment community, and indeed the world, that insider trading and corruption in connection with this nation’s capital markets will not be tolerated.’”
Rajaratnam objected, claiming that no penalty was warranted as punishment was already rendered by the criminal indictment.
The district court moved to impose a penalty three times the amount of the profit gained from Rajaratnam’s insider trading, according to the ruling.
“Rajaratnam’s violations were egregious; he acted with a high degree of scienter; his conduct created substantial losses to investors; his conduct continued for years; and he had the ability to pay a substantial penalty,” the district court found.
The court also found it was necessary to tack on a civil penalty, given the “huge and brazen nature of Rajaratnam’s insider trading scheme.”
Rajaratnam’s 11-year sentence is the longest prison term ever imposed for insider trading.