Hedge fund tycoon gets 11 years in prison

Raj Rajaratnam, the billionaire hedge fund manager convicted of the largest insider trading scheme in history, was sentenced Thursday to 11 years in prison -- a record for the crime -- but escaped the two-decade term that Manhattan federal prosecutors said he deserved for his $70 million fraud.

The Sri Lankan founder of Galleon Group declined the chance to speak at his sentencing or say he was sorry afterward. He was fined $10 million, assessed $53 million in restitution and denied bail from house arrest pending appeal that would have delayed his scheduled Nov. 28 surrender.

"His crime and the scope of his crime reflect a virus in our business culture that needs to be eradicated," said U.S. District Judge Richard Holwell.

Rajaratnam, 54, who lives in Manhattan and owns houses in Sri Lanka and Singapore, was convicted in May of conspiracy and securities fraud. He didn't react visibly to the sentence and was ushered out of the courthouse and into a waiting Chevy Suburban by a flying wedge of aides without commenting.

The sentencing had sparked debate over the seriousness of insider trading relative to frauds that are typically sentenced more harshly, such as Bernard Madoff's Ponzi scheme. Prosecutors wanted a long prison term to send a strong message, but it was unclear whether 11 years -- one year longer than the prior high -- would accomplish that.

Rajaratnam's illegal trades, the government said, went on for nearly a decade, involved 19 different public companies, corrupted at least 20 corporate insiders and traders, and generated more than $70 million in profits for Rajaratnam and his hedge fund investors.

Prosecutors called Rajaratnam "the modern face of insider trading" and argued that federal sentencing guidelines of about 191/2 years to a little over 24 years were justified.

"He is a man who, despite being born into privilege . . . did his criminal conduct in a brazen, pervasive and egregious way," prosecutor Reed Brodsky told Holwell.

Defense lawyers argued that, unlike fraudsters like Madoff, Rajaratnam had not ruined the lives of hundreds of people, and said the government's requested sentence would exceed that for violent crimes such as kidnapping.

"This case has already sent a message to Wall Street that insider trading can mean the loss of . . . everything that you have built in your whole life," lawyer Terence Lynam said.

In explaining his sentencing, Holwell said he believed calculations of financial gain that are affected more by the stock market than the crime can produce skewed results under the sentencing guidelines. He also said Rajaratnam deserved leniency because he was generous to charities, and had a life-threatening diabetic and kidney condition.

"It is tempting in high-profile cases . . . to ignore factors that might argue in favor of a moderated sentence," the judge said. "The clear message is important, and anything less is less than satisfying. But the court has an obligation to consider individual circumstances."Holwell said he would recommend imprisonment at a federal prison medical center in Butner, N.C., whereMadoff is serving a 150-year sentence.