NCJ Number
242824
Journal
American Criminal Law Review Volume: 49 Issue: 4 Dated: Fall 2012 Pages: 2021-2041
Date Published
2012
Length
21 pages
Annotation
This article examines the case against Raj Rajaratnam and the sentence that he received for insider trading.
Abstract
In 2011, Raj Rajaratnam, chief of a large hedge fund, was found guilty of insider trading and sentenced to 11 years in prison and a fine of $10 million and forfeiture of almost $54 million in profits. Mr. Rajaratnam was also ordered to pay over $92 million in fines as a result of a civil suit brought by the Securities and Exchange Commission (SEC). This article examines the sentence issued to Mr. Rajaratnam and explores the methods used by prosecutors to successfully bring charges against him. The author presents an overview of the laws pertaining to the charges filed against the defendant: conspiracy to commit securities fraud and insider trading. Next the author presents an outline of the case, United States v. Rajaratnam, detailing the insider network established by Mr. Rajaratnam, the Federal Government's investigation of the network, and its use of wiretaps in the case. The author notes that this case was the first time that the Federal Government had used wiretaps to record phone calls in an insider trading case. The final section of the article discusses the sentence handed down to Mr. Rajaratnam, noting that the sentence was a correct application of the law for legitimate criminal punishment reasons, and not as an attempt to scapegoat the defendant for the financial crisis, as some critics have alleged. The author also discusses how the Federal Government's successful use of wiretaps in this case will lead to more use of this technique in future cases.