Raj Rajaratnam, the co-founder of Galleon Group whom prosecutors called “the modern face of illegal insider trading,” was sentenced on Thursday to 11 years in prison, one of the longest terms ever for insider trading but less than half of the maximum sought by the government.
Mr. Rajaratnam is the central figure in what U.S. investigators called the largest hedge fund insider-trading case in U.S. history. The probe, which leveraged the widespread use of FBI wiretaps for the first time in such an inquiry, led to convictions of more than two dozen people.
Prosecutors said Mr. Rajaratnam made more than $72 million by using illegal tips to trade in stocks of companies including Goldman Sachs Group, Intel, Google, ATI Technologies and Clearwire.
U.S. District Circuit Judge Richard Holwell sentenced Mr. Rajaratnam before a packed courtroom in lower Manhattan, saying his term was enhanced due to his leadership role in the scheme and obstruction of a related SEC probe. Mr. Holwell also noted that he received more than 200 letters on the fund manager’s behalf, and that Mr. Rajaratnam, who declined to speak, suffers from diabetes and needs a kidney transplant.
Prosecutors asked for a prison term ranging from 19 years and seven months to 24 1/2 years, citing federal sentencing guidelines and the “historic nature of his crimes.”
Mr. Holwell denied Mr. Rajaratnam’s request to remain free on bail while he appeals his conviction, and told him to report to the medical center at the federal correctional complex in Butner, N.C., in 45 days. Bernard Madoff, the convicted Ponzi scheme mastermind, is serving a 150-year term at the facility.
The judge also ordered Mr. Rajaratnam to forfeit $53.8 million and go through two years of supervised release after his prison term is up.
Mr. Rajaratnam said nothing to reporters as he left the courthouse and got into a black sport utility vehicle.
“Two years ago, Raj Rajaratnam stood at the summit of Wall Street, commanding his own financial empire,” Manhattan U.S. Attorney Preet Bharara said in a statement after the hearing. “Today, Mr. Rajaratnam stood once more and faced justice which was meted out to him. It is a sad conclusion to what once seemed to be a glittering story.”
Mr. Bharara said Mr. Rajaratnam’s is the longest prison sentence given for insider trading.
The Galleon case helped trigger two other overlapping insider-trading investigations that relied heavily on wiretaps, a tool more commonly used to probe organized crime. In the past 18 months, Mr. Bharara charged more than 50 people in the three schemes with insider-trading crimes.
A federal jury in Manhattan convicted Mr. Rajaratnam on May 11 of all 14 counts of securities fraud and conspiracy against him. During the two-month trial, the panel heard evidence that he engaged in a seven-year conspiracy to trade on inside information from corporate executives, bankers, consultants, traders and directors of public companies.
The U.S. compared Mr. Rajaratnam to Enron Corp.’s Jeffrey Skilling, who helped bring down the massive energy trader, and WorldCom’s Bernard Ebbers, convicted in what prosecutors called “the worst of accounting frauds.”
Mr. Skilling was sentenced to 24 years in prison on charges that included fraud and insider trading, and Mr. Ebbers got 25 years. The Galleon Group hedge fund manager was also put in the same category as Mr. Madoff, whose massive scam they said represented “the worst of Ponzi schemes.”