Judge Richard H. Howell sentenced Raj to 11 years in prison this morning following his August conviction for securities fraud and conspiracy. According to the New York Times, the 11 year sentence is the longest ever for insider trading, surpassing the 10 year sentence of Zvi Goffer, also a former Galleon trader (and just short of my prediction of a 15 year sentence back in August).
Deterrence matters. As a former Federal Prosecutor, I’ve seen the power that a stiff sentence and a prominent presence on the front pages can have on lowering crime rates. Haynes & Boone white collar defense attorney, David Siegal expressed a similar sentiment: “One legacy of this case that Wall Street will be more careful about what they say on telephones than they used to be.” Good. We should hope that vigilance on the phone will spill over into vigilance when walking the line between aggressive fact gathering and insider trading.
The SEC can celebrate a job well done, but not for too long. We need these investigators – who, for the first time in history, placed wiretaps on suspected insider traders – back out there catching bad guys. Stay on the hunt. Stay on the front pages. Rajaratnam made profits of more than $60M from insider trading…who is making $70M, $100M?
Insider trading affords the well-connected on Wall Street an unfair advantage over the average yet diligent investor on Main Street. That, my friends, is unacceptable. The regulatory agencies must remain on the watch, making sure the game remains fair – for everyone.
Assisted by Zachary Kady
Update (10/14/2011): Please enjoy the Newsy video coverage below.