FILE - This June 2007 file photo provided by Dr. William Petit Jr., shows Dr. Petit, left, with his daughters Michaela, front, Hayley, center rear, and his wife, Jennifer Hawke-Petit, on Cape Cod, Mass. Dr. Petit was severely beaten and his wife and two daughters were killed during a home invasion in Cheshire, Conn., July 23, 2007. (AP Photo/William Petit, File)
Thursday, October 13, 2011
Hedge founder gets 11 years in insider trade probe;
The defense asked for leniency partly based on Rajaratnam's "failing health" and his "unique constellation of ailments."
FILE - In this May 11, 2011 file photo, Raj Rajaratnam, billionaire co-founder of …
Video: Burns Says Rajaratnam May Get 14 or 15 Year SentenceBloomberg 5:47 | 1042 views
NEW YORK (AP) — A former billionaire described by the government as "the modern face of illegal insider trading" was sentenced Thursday to 11 years in prison, the longest insider trading sentence ever but far short of the two decades sought by prosecutors.
Galleon Group founder Raj Rajaratnam also was fined $10 million and ordered to forfeit $53.8 million by U.S. District Judge Richard J. Holwell, who said he concluded that Rajaratnam made well over $50 million in profits from his illegal trades.
"His crimes and the scope of his crimes reflect a virus in our business culture that needs to be eradicated," Holwell said. "When the integrity of the marketplace is called into question, the public suffers."
The sentence eclipsed by one year the prison term given to one of Rajaratnam's co-defendants just weeks ago.
The Sri Lanka-born Rajaratnam, 54, was ordered to report to a yet-to-be-designated prison on Nov. 28. His lawyers asked that he be allowed to report to the medical facility at the Butner Federal Correctional Complex in North Carolina, where Bernard Madoff is serving his 150-year sentence after admitting to a multi-decade Ponzi scheme that cheated thousands of people out of billions of dollars.
The judge gave Rajaratnam leniency, citing his need for a kidney transplant and his advanced diabetes. And he credited Rajaratnam's charitable work, which he called "the defendant's responsiveness to and care for the less privileged." The judge cited Rajaratnam's work to help victims of the earthquake in Pakistan and Sept. 11, among others.
Asked if he wished to speak, Rajaratnam said only, "No thank you." He has been a quiet presence at all his court proceedings, declining even to sit at the defense table during his trial. When he stepped off the elevator on the floor of his courtroom Thursday, he was carrying a water bottle and casually asked no one in particular: "Which way?"
The sentencing culminates a series of convictions and sentencings that followed the October 2009 announcement of Rajaratnam's arrest. More than two dozen people were arrested; all were convicted. The other defendants got sentences ranging from a few months to 10 years. The probe touched off a related investigation of those on Wall Street who corrupt the research purpose of networking firms by letting unscrupulous public company employees spill secrets to hedge fund managers.
The case drew intense coverage in much the way the prosecutions of Michael Milken and Ivan Boesky had two decades before. Boesky was a stock speculator who pleaded guilty to charges and was released in 1990 after serving two years in prison. Milken was known as the junk bond king. He pleaded guilty to securities violations in 1989, served 22 months in prison and paid a $200 million fine.
The Rejaratnam probe relied heavily on the most extensive use of wiretaps ever for a white-collar case, capturing conversations in which Rajaratnam and his co-conspirators could be heard gleefully celebrating their inside information.
Assistant U.S. Attorney Reed Brodsky told Holwell before the sentence was announced that Rajaratnam made up to $75 million in illegal profits from insider trading he indulged in since at least the late 1990s as he led one of the world's largest hedge funds. The government has said he switched so much money around within his multibillion dollar funds that the movement of price in individual stocks could be traced to his trading whims.
"Today you sentence a man who is the modern face of illegal insider trading," Brodsky told Holwell. "He is arguably the most egregious insider trader to face sentencing in a courthouse in the United States."
The prosecutor said Rajaratnam went about his crime in a "brazen, pervasive and egregious" manner, corrupting at least 20 fellow traders and at least 16 insiders with a lust for the millions of dollars that can flow to anyone who gets an edge in the securities markets. He said at least 19 public companies were victims of his crimes.
"The duration of his crimes was extraordinary," Brodsky said.
Prosecutors had asked Holwell to send Rajaratnam to prison for at least 19½ years for his May conviction on securities fraud charges. They said federal sentencing guidelines called for up to 24½ years. A Probation Department report recommended a 15-year sentence.
Attorney Terence Lynam told Holwell that Rajaratnam should receive credit for his considerable charitable works and he urged compassion for his illnesses.
"Any lengthy term of imprisonment will surely shorten his life," he said. "Based on the conduct for which he was convicted, he does not deserve to die in prison."
Lawyers for the Sri Lanka native argued for 6½ to 9 years. They said the illegal profits actually total around $7 million, when the trades at his Galleon Group are disregarded.
In a statement, U.S. Attorney Preet Bharara recalled telling an audience when he announced charges against Rajaratnam two years ago that the case was a wake-up call for Wall Street.
"We can only hope that this case will be the wake-up call we said it should be," he said in the statement Thursday. "It is a sad conclusion to what once seemed to be a glittering story. ... Privileged professionals do not get a free pass to pursue profit through corrupt means."
In another statement, FBI Assistant Director-in-Charge Janice K. Fedarcyk said Rajaratnam was no different from so many others who claim "superior research and acumen" gave them superior results in the stock markets.
"In fact, as his trial determined, he relied on — indeed, actively cultivated — insider information. His considerable fortune was built on a clandestine network of corruption and concealment," she said.
Associated Press Writer Karen Matthews contributed to this report.
8 killed in Southern California salon shooting;
"She could gab away. She was one of those girlfriends you could never get enough of. She made you smile and she made you laugh," Salveson said.
- View Gallery Scott Evans Dekraai, 42, of Huntington Beach, is pictured in this booking photo released …
- A police officer talks to onlookers near the site where six people were killed and …
SEAL BEACH, Calif. (AP) — Every hair-dressing station was full at Salon Meritage when a gunman burst through the door and began shooting, sending terrified customers diving for cover. The shooter then stepped outside, shot a man sitting in a truck in the parking lot and sped off.
By the time it was all over Wednesday, eight people were dead and another one in critical condition in Seal Beach, a resort town so calm the police spokesman couldn't even recall the last homicide.
"There was like a 'pop pop' ... and my receptionist screamed out, 'He just shot that man' and we all went into the bathroom and called 911," said Kimberly Criswell, who owns a salon two doors away and knew many hairstylists at Salon Meritage. "I'm sure I've lost some friends today."
Police arrested 42-year-old Scott Dekraai about a half-mile from the scene but did not release a motive or any other details.
In all, one man and five women died at the salon, one man and one woman died after being sent to a nearby hospital, and one woman remained in critical condition. Their names have not been released.
Friends of the salon owner and other employees said Dekraai was the ex-husband of a stylist who worked there. One of the licensed cosmetologists at the salon was listed as Michelle Dekraai.
One witness, Glenn Zachman, said police placed plastic bags over the man's hands to preserve possible gunshot residue.
The man was cooperative when officers, working from a description of the shooter, stopped him near the salon, Bowles said.
Kari Salveson of Los Alamitos, who attended a service for the victims at SeaCoast Grace Church in Seal Beach, said she had known Michelle Dekraai for more than 10 years and was aware that she and her ex-husband were involved in a bitter custody dispute over their son, who is about 7 or 8 years old.
She said Michelle Dekraai made her every visit to the salon special.
In Huntington Beach, people were shocked to learn that one of the friendliest men in the neighborhood had been arrested for the shootings.
Dekraai's neighbors described him as an outgoing man who invited them over for pool parties at the house he'd lived in for about six years. They said he doted on his son, playing catch with the boy in his yard.
Neighbors said they were aware Dekraai was in a custody battle with his ex-wife.
"It was a very difficult battle and he was trying to get more time" with his son, said Jo Cornhall, who lives across the street.
Next-door neighbor Stephanie Malchow, 29, last saw Dekraai on Tuesday morning as she was leaving for work. She was shocked when she saw the photo of the stocky man with thinning hair being detained by Seal Beach police.
"I'm like, no, not this neighbor, no way, he's the nicest guy ever," Malchow said.
Dekraai married his current wife two or three years ago in his backyard, said Malchow, who attended the wedding.
"He seemed very happy, he was just so happy he found someone new who loved his son," she said.
Dekraai walked with a limp after a tug boat accident that killed a fellow tug boat operator about two miles off the coast in 2007. Cornhall said he uses a brace for his leg.
Police were still trying to determine the sequence of events inside the shop. They wouldn't say what type of weapon was used or if the gunman used more than one.
"We're unsure at this point if he shot from the entrance and people, as they were shot, ran in seeking cover or seeking shelter, but we have fatalities throughout the salon," Bowles told reporters.
Seal Beach has seen just one other homicide in the past four years, and Bowles said Wednesday's killings were the greatest tragedy to ever strike the seaside town.
The downtown is dotted with salons, restaurants, antique shops and boutiques clustered just blocks from a beach and pier popular with teenagers and young families. Many residents live and work within walking distance of the ocean.
"It's like Mayberry in the middle of Los Angeles," said Doyle Surratt, lead pastor of SeaCoast Grace Church. "We're small and all the kids go to school together."
Associated Press writers John Rogers and Michael R. Blood in Los Angeles and Amy Taxin in Huntington Beach contributed to this report.