Prison sentences are wild cards and judges’ justice diverse in Galleon insider trading cases

By Larry Neumeister, AP

NEW YORK — The prison term awaiting a one-time billionaire hedge fund founder convicted of insider trading charges is unpredictable in a Manhattan courthouse where judges vary considerably in their assessment of how justice should be dispersed. Sri Lanka-born Raj Rajaratnam, 54, is scheduled to be sentenced Thursday for his conviction at trial earlier this year. If federal prosecutors have their way, he’ll get between 19 and 24 years in prison for what they say was more than US$72 million in profits for himself and his Galleon Group of hedge funds. If defense lawyers are persuasive, he’ll face between 6 and 9 years for what they say was about US$7 million in illegal profits. Regardless of the outcome, his fate may have been decided when Judge Richard J. Holwell was selected to hear the case after Rajaratnam’s October 2009 arrest. U.S. Attorney Preet Bharara’s campaign against insider trading on Wall Street — an effort that has resulted in nearly 50 arrests — has kept some of the more than three dozen trial judges busy in the Southern District of New York. The tone and result in sentencings have varied widely for those charged in the case against Rajaratnam and two dozen co-defendants, all of whom have been convicted, most as a result of guilty pleas.

The longest sentence handed down — 10 years — came from a stern Judge Richard Sullivan, who last month dispensed some finger-wagging words toward Zvi Goffer.He told Goffer that he had a gambler’s mentality after his arrest. “You decided to double down and gamble on a trial,” Sullivan said, adding that Goffer acknowledged his crimes post-trial. “Had you made that acknowledgement before trial, you might have shaved almost three years off your guideline’s sentence,” he said as he gave him a sentence near the lower end of the guideline’s range. “The prospect of a shorter sentence is something that you passed up to do all or nothing. You went for broke.” He added: “I am not saying you are going to be punished for going to trial, but there are consequences that flow from that. You don’t get the benefit of people who accept responsibility.” A few hours later, Winifred Jiau, 43, of California, was sentenced to four years in prison after her conviction in an insider-trading probe. The investigation was a spinoff of the Rajaratnam-Galleon probe. Jiau received half the prison term recommended by sentencing guidelines from Judge Jed Rakoff, who had a different view of the effects of going to trial. “I know judges vary. It will never be the policy of this court to make a huge difference in sentence between those who exercised their right to go to trial and those who plead guilty, because at that point I think it becomes no longer a recognition of the credit that should justly be given for acceptance of responsibility, it becomes a veiled price of going to trial,” he said. “There should be no price on going to trial.” For Rajaratnam, Holwell has not yet ruled whether he will favor the prosecution’s view of federal sentencing guidelines or the more lenient version offered by the defense. Rajaratnam can take some solace in the leniency Holwell gave Rajaratnam’s friend, Danielle Chiesi, a hedge fund trader who pleaded guilty in the case and blamed her boss for coercing her into insider trading during a 20-year affair. She was sentenced to 2 years in prison, less than the 3 years to 4 years requested by prosecutors and far below the 155 years the charges she had once faced carried.