A federal appeals court did not immediately rule Wednesday whether hedge fund founder Raj Rajaratnam must report to prison next week for an 11-year sentence for insider trading, the longest term ever given for the crime.
Attorney Patricia Millett told the 2nd U.S. Circuit Court of Appeals in Manhattan that Rajaratnam should remain free on bail while the appeals court hears a challenge to his conviction in the biggest insider trading case in history.
Rajaratnam, 54, was sentenced in October after his conviction this year on charges that he engaged in insider trading from 2003 through October 2009 at the Galleon Group of hedge funds that he founded. Prosecutors said insider trading schemes involved the stocks of at least 19 different public companies and resulted in at least $70 million in illegal gains.
Rajaratnam was also ordered to forfeit $53.8 million and to pay a $10 million fine.
Millett said court papers filed to secure wiretaps that provided evidence crucial to his conviction were improperly made, raising a substantial question of law that entitles him to remain free until the appeals court hears the case sometime next year.
Assistant U.S. Attorney Jonathan Streeter told the three-judge panel that the wiretaps were properly obtained and that a district judge had already determined the information that was improperly excluded from the wiretap application would not have resulted in a denial of the wiretaps.
In their questions put to both sides, 2nd Circuit judges did not indicate how they might rule on the request to permit the onetime billionaire to remain free on $100 million bail.
There was considerable discussion during the arguments about the failure of the government to include in its request for wiretaps that the Securities and Exchange Commission had been conducting its own civil investigation into insider trading by Rajaratnam and others.
In court papers, Rajaratnam's lawyers had argued that failure to include information about the SEC probe, including that Rajaratnam and five others had been deposed and more than 4 million documents had been turned over, required suppression of the wiretap evidence at trial.