Bloomberg News

Rajaratnam Stays Silent Facing More Than a Decade in Prison

October 14, 2011

(To see a list of previous sentences tied to the nationwide insider trading probe, please click here.)

Oct. 14 (Bloomberg) -- Raj Rajaratnam began his odyssey through the court system in silence, remaining mute on the day of his insider-trading arrest two years ago. In the end, after choosing not to testify at his trial, he uttered next to nothing as he was sentenced to prison for 11 years.

The hedge fund manager’s silence stood in contrast to a government case built on his words -- words secretly recorded by investigators using wiretaps for the first time as part of a federal insider-trading investigation. As prosecutors said during yesterday’s sentencing in Manhattan federal court, the offense was all about talking.

“The crime of insider trading is essentially committed through communication,” Assistant U.S. Attorney Reed Brodsky said as U.S. District Judge Richard Holwell imposed sentence.

The number of words Rajaratnam uttered yesterday might have been counted on one hand. He said, “Yes,” when Holwell asked whether he had read the probation department’s presentence report, and “No, thank you,” after being asked if he wanted to speak before he was sentenced. His final word was “Yes,” when the judge asked whether he understood his right to appeal.

Rajaratnam, 54, must report to federal prison Nov. 28 after being convicted in what prosecutors said is the largest insider- trading case ever. The co-founder of the Galleon Group LLC hedge fund didn’t speak publicly before his trial, take the witness stand during it, or comment afterwards.

‘Detective Work’

The only indication of what Rajaratnam was thinking came in a court filing last month, when prosecutors said he told a probation official he wasn’t “clear” on “the line between permissible ‘detective work’ and impermissible insider trading.”

In court yesterday, Rajaratnam gave no hint of how he viewed the case against him. His expression remained inscrutable -- he exhibited neither anger nor excitement, even when the judge handed down a sentence that was less than half of the maximum sought by the government.

In a striped blue tie and charcoal suit, Rajaratnam sat still in his seat as Brodsky called his crimes “brazen, pervasive and egregious.” He didn’t react when defense attorney Terence Lynam said the prison term sought by prosecutors was as long as a murderer might get.

Swayed Slightly

At most, Rajaratnam swayed slightly as Holwell said he would remain on probation for two years even after leaving prison about a decade from now. Otherwise, the hedge fund manager was motionless. He never expressed remorse or apologized, often part of the usual ritual of sentencing.

Nor did the court hear from Rajaratnam’s wife, Asha, who sat in the third row in the gallery and listened as Holwell weighed her husband’s fate. As she left the courthouse, Rajaratnam’s bodyguard stood between her and members of the media.

Rajaratnam’s taciturn manner inside the courtroom differed from his effusiveness outside of it.

Friends testified during his trial that Rajaratnam was a friendly, outgoing man. On wiretaps played in court, he cracked jokes and chuckled. In the hour before sentencing, he sat in the courthouse cafeteria talking with his lawyers, his hands arched beneath his chin as the attorneys leaned forward to hear.

Key Players

While Rajaratnam didn’t say much in court since his arrest Oct. 16, 2009, most other key players in his prosecution did.

Brodsky called for a sentence that “sends a clear and unmistakable message to money managers and hedge funds” that insider trading will be punished.

Lynam urged Holwell not to be swayed by the “nonstop” media attention to the case.

And four former Securities and Exchange Commission commissioners wrote to the judge detailing why insider trading harms the public markets.

Scores of Rajaratnam’s friends, family and associates wrote about his charity, good works and public spiritedness.

The last word, however, belonged to the judge, who rarely if ever voiced his opinions about the case.

“Simple justice,” said Holwell, looking down on Rajaratnam from the bench, “requires a lengthy sentence.”

The case is U.S. v. Rajaratnam, 09-01184, U.S. District Court for the Southern District of New York (Manhattan).

--With assistance from Chris Dolmetsch and Cullen Wheatley in Manhattan federal court. Editors: Charles Carter, David E. Rovella

To contact the reporters on this story: David Glovin in Manhattan federal court at; Patricia Hurtado in Manhattan federal court at; Bob Van Voris in Manhattan federal court at

To contact the editor responsible for this story: Michael Hytha at

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