A one-time billionaire convicted on insider trading charges should receive leniency at sentencing because of his failing health, because the government has exaggerated his crimes and because a life of good deeds separate him from notorious white-collar criminals, his lawyers argued in court papers submitted Tuesday.
Sri Lanka-born Raj Rajaratnam, free on $100 million bail, is scheduled to be sentenced next month after his May conviction on nine counts of insider trading and five counts of conspiracy, crimes that occurred after he founded the Galleon Group of hedge funds more than a dozen years ago. He is the top defendant in a case prosecutors have described as the biggest hedge fund insider trading probe in history.
Lawyers for Rajaratnam, 53, said they have submitted to his probation officer information about "significant and challenging medical issues" that are expected to worsen soon.
"Mr. Rajaratnam is not a healthy man, and his death will be hastened by a term of imprisonment," the lawyers wrote.
But federal prosecutors recommended he be sentenced to a maximum term of 24 1/2 years in prison.
Calling Rajaratnam's criminal conduct "brazen, arrogant, harmful and pervasive," federal prosecutors said in a memo to the judge that the defendant "operated as a billion-dollar force of deception and corruption on Wall Street."
"He is arguably the most egregious violator of the laws against insider trading ever to be caught," they argued. "He is the modern face of illegal insider trading."
During a two-month trial, prosecutors said Rajaratnam used a network of friends and old college buddies to cheat on Wall Street, making more than $63 million illegally.
His lawyers said in their sentencing submission that the government's assumptions in reaching its figure were "unrealistic and entirely speculative." They said $36.3 million would be closer to the truth and added that most of the money went to investors in a family of funds in which $6.5 billion was once under management. They said that his gains reached about $7.4 million and that more than 99 percent of the $141.5 million worth of trades he made each day as a professional money manager was legitimate.
The lawyers argued that it would be unfair to subject Rajaratnam to a lengthy prison term after he already has lost his business and reputation and has been exposed to scorn and public obloquy.
They said it was severe punishment for a man described in hundreds of letters submitted to the judge on his behalf as "remarkable for his kindness, quiet manner, lack of pretense and boundless generosity."
They noted that he insisted during the 2008 financial crisis that his fund, unlike others, not try to block or slow clients from withdrawing their money. They cited donations of more than $45 million to charities in the U.S. and abroad, including $5 million spent building new homes after he witnessed the 2004 destruction in Sri Lanka, where he was on vacation when a tsunami struck.
After his arrest in October 2009, Rajaratnam helped to quickly return investors' capital from his company, which had employed more than 150 workers before it was forced to close, the lawyers said.
"These facts alone stand in stark contrast to recent notorious Wall Street frauds involving executives who fleeced investors, lining their own pockets with money literally stolen from investors through fraudulent Ponzi schemes," they said.
Rajaratnam, born to a wealthy family, went to India at age 11 to attend school before going three years later to a boarding school in England, where he later attended the University of Sussex, graduating in 1980 with a bachelor of science degree in engineering.
In 1980, he moved to the United States, where he attended graduate school at the Wharton School of the University of Pennsylvania. He graduated near the top of his class with an advanced degree in business administration in 1983.
Although he initially returned to Sri Lanka, violence there led him to return to the United States, where his parents, brothers and sisters eventually followed, all becoming U.S. citizens, the lawyers wrote.