Raj Rajaratnam: How Does He Stack Up in Big Insider-Trading Convictions?

By Couch, Aaron | The Christian Science Monitor, May 11, 2011 | Go to article overview

Raj Rajaratnam: How Does He Stack Up in Big Insider-Trading Convictions?


Couch, Aaron, The Christian Science Monitor


Raj Rajaratnam, a wildly successful hedge fund manager, was convicted Wednesday of 14 fraud and conspiracy counts for using insider information to make more than $60 million. Prosecutors call it the largest insider-trading case for a hedge fund. That certainly lands him in the Top 5 of convicted inside traders in the United States. Here is a look at the five most notorious convictions:

Raj Rajaratnam, a wildly successful hedge fund manager, was convicted Wednesday of 14 fraud and conspiracy counts for using insider information to make more than $60 million. Prosecutors call it the largest insider-trading case for a hedge fund. That certainly lands him in the Top 5 of convicted inside traders in the United States. Here is a look at the five most notorious convictions:

#6 Raj Rajaratnam (penalty to be determined)

Over a seven-year period, Raj Rajaratnam used a network of insiders to get advance information on what was going on in public companies to make money at the expense of other investors.

Using an extensive trove of wiretaps - reportedly, the most ever in a case of white-collar crime - prosecutors let jurors hear how Mr. Rajaratnam uncovered key information and was able to trade on it, once making $1 million with a single trade. He even bragged about it in calls to employees, prosecutors said.

After a seven-week trial and more than two weeks of deliberations, the jury found him guilty on all 14 counts - five counts of conspiracy and nine counts of security fraud. Securities fraud carries a maximum sentence of 20 years, which if applied to Rajaratnam would be the stiffest prison sentence of any of the Top 5 convicted inside traders.

Sentencing is scheduled for July 29. Rajaratnam remains free on bail until then.

#5 Joseph Contorinis (Sentenced to six years in prison)

In 2010, Joseph Contorinis was convicted of insider trading that prosecutors say netted $7 million in profit. He was tipped off by UBS AG investment banker Nicos Stephanou about upcoming acquisitions and mergers.

Mr. Contorinis was sentenced to six years in prison under federal guidelines that give longer sentences for bigger profits. The prosecution argued that Contorinis should have received more prison time, because the insider tips had kept his fund from losing more than $6 million, which they said should have been added to his total profit.

#4 Sam Waksal (Seven-year sentence, $4 million in fines and back taxes)

You might not recognize Samuel Waksal's name, but you've certainly heard of his friend Martha Stewart. In 2001, Mr. Waksal, the founder of ImClone Systems, got word that the Food and Drug Administration would reject his company's application for approval of a new drug. Waksal allegedly warned Ms. Stewart, who sold 4,000 shares of the stock before the FDA announcement sent it plummeting. …

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