Mon, Oct
0 New Articles

Center of Insider Trading Scandal Sentenced to 11 Years, Fined $10 Million

Channel News
  • Smaller Small Medium Big Bigger
  • Default Helvetica Segoe Georgia Times

Jury finds Raj Rajaratnam guilty in case that earlier rocked IBM and ensnared its former STC executive Robert W. Moffat Jr. 

Raj Rajaratnam, the hedge fund billionaire at the center of the biggest insider-trading scandal in U.S. history, was sentenced Thursday to 11 years behind bars—the stiffest sentence ever handed down for such a crime, according to the Associated Press.

"His crimes and the scope of his crimes reflect a virus in our business culture that needs to be eradicated," U.S. District Judge Richard J. Holwell said at sentencing, the AP reported. "Simple justice requires a lengthy sentence," the judge said.

Rajaratnam, 54, founder of the $7 billion Galleon Group hedge fund will also have to pay a $10 million fine imposed by the court, which ordered him to forfeit $53.8 million in what it deemed were illicit profits, according to the AP.

Rajaratnam was found guilty by a jury earlier this week where he stood trial in a Manhattan federal court on 14 counts of securities fraud and conspiracy. The jury announced its unanimous verdict after deliberating for 12 days in the case where prosecutors presented evidence of FBI wiretapping and testimony from three of Rajaratnam's former friends and associates. The jury convicted Rajaratnam on nine counts of securities fraud and five counts of conspiracy. 

Prosecutors argued Rajaratnam made as much as $75 million through his carefully selected network of friends, former classmates, and other informants from different companies and investment firms. Prosecutors said these friends supplied him with advance information on company earnings and merger announcements. In exchange, they received cash kickbacks or the opportunity to profit from insider trades.  

Among the companies Rajaratnam had inside information on, and from which he profited, were IBM, Intel, Google, AMD, Hilton Hotels, and Goldman Sachs.

His sentencing was the last significant event in a series of prosecutions that followed Rajaratnam's 2009 arrest. More than two dozen people in all were arrested in the investigation, which has since been called: "Perfect Hedge." All those arrested were convicted, including former IBM executive Robert W. Moffat Jr., sentenced to serve six months behind bars for his role in the insider-trading scandal that rocked IBM's corporate world.

Moffat, 54, of Ridgefield, Connecticut, former senior vice president and general manager of IBM's Systems and Technology Group, was sentenced last September to six months in jail as part of a plea bargain with federal prosecutors, who felt he should do at least some jail time and recommended as much to the judge. Moffat has since served his time and has been released.  

The federal judge hearing Moffat's case also was unsympathetic to his appeals for freedom and gave him the maximum under his plea agreement. The judge lectured him that, "White collar crime is just as destructive to our social fabric" as other types of crimes, according to reports in the New York Daily News. 

Moffat's motivation for sharing insider information about IBM and other technology firms with co-defendant Danielle Chiesi, 43, a New York consultant at New Castle Funds, and one of those charged, apparently was not financial, according to published reports. Moffat is reported to have had an "intimate, personal relationship" with Chiesi, whom he later turned on and accused of "playing" him. The charge elicited a series of provocative headlines in New York's media, including the New York Post's "IBMer says hedge hottie 'played him' " and the New York Times' "Moffat: His Mistress Made Him Do It." 

"Your honor, I made terrible mistakes in judgment, which will haunt me for the rest of my life," the Daily News quoted Moffat as telling the judge at sentencing. His voice cracking with emotion and his face wet with tears, Moffat anguished that, "What makes this so painful to me is the knowledge that my actions hurt my wife, my children, my brothers and sister, friends, colleagues at IBM—all of whom put their trust and confidence in me," the Daily News quoted him as saying. According to the AP, Moffat lamented he has been ostracized by former friends and colleagues at IBM and lost out on $65 million in benefits he probably would have received had he been able to remain with the company. Moffat at one time was seen as a possible candidate to lead the global firm. 

Moffat told the judge that if the humiliation and the loss of dignity and his reputation, as well as significant financial loss, weren't bad enough, the stress from the prosecution had exacerbated his wife's multiple sclerosis, a degenerative nerve disease. Apparently his wife, Amor, stayed by his side throughout the ordeal, and Moffat publicly expressed gratitude in court for her loyalty. 

In a letter submitted to the court unsuccessfully pleading with the judge to grant her husband probation rather than prison time, Amor Moffat said that she did "not regret the choices I've made in staying with Bob, both in support of him as a person, and as a wife who still firmly believes in and loves her husband" reported Bloomberg news. Mrs. Moffat said that she was "able to look beyond the pain of betrayal and stand firmly by his side in support."

Moffat escaped the full force of the prosecution's wrath and could have spent 25 years behind bars if convicted at trial. He was accused of passing insider information to Chiesi in an attempt to help a woman from whom he was receiving sexual favors. He was the 11th person to plead guilty in the insider-trading scandal that involved the Galleon Group and New Castle, an equity hedge fund group of Bear Stearns Asset Management, Inc., now part of JPMorgan Chase. Not all of those charged, pleaded guilty. Rajaratnam and Chiesi initially decided to fight the charges, but Chiesi, a former beauty queen turned stock trader, was sentenced to 30 months in prison by Judge Holwell last July after she changed her plea to guilty of three counts of conspiracy to commit securities fraud.    

Besides Moffat, Chiesi and Rajaratnam, among the others charged in the investigation were Rajiv Goel, 51, Los Altos, California, former director of strategic investments at Intel Capital (the investment arm of Intel Corp.); Anil Kumar, 51, Santa Clara, California, former director at McKinsey & Co., Inc., a global management and consulting firm; and Mark Kurland, 60, of New York City, a top executive of New Castle.

At the time of his arrest, Rajaratnam was reported to be one of the richest men on earth, ranked by Forbes as No. 559 on its 2009 list of billionaires and worth an estimated $1.3 billion. His bail was set at $100 million, and he had to stay within 110 miles of New York City.

The Sri Lanka-born Rajaratnam was ordered on Thursday to report to a yet-to-be-announced prison on Nov. 28. His lawyers asked that he be sent to the medical facility at the federal prison in North Carolina where Bernard Madoff is serving his 150-year sentence. Rajaratnam apparently has advanced diabetes and needs a kidney transplant.

MC Press Online's staff of reporters and editors are trained professionals who share a background in journalism and have a passion for technology. Many have been in the IBM midrange industry for more than 20 years and have a keen sense of what's important to IBM i and Power Systems users. If you have a news tip, story idea, or press release, email it to This email address is being protected from spambots. You need JavaScript enabled to view it..



Support MC Press Online

$0.00 Raised:

Book Reviews

Resource Center

  • SB Profound WC 5536 Have you been wondering about Node.js? Our free Node.js Webinar Series takes you from total beginner to creating a fully-functional IBM i Node.js business application. You can find Part 1 here. In Part 2 of our free Node.js Webinar Series, Brian May teaches you the different tooling options available for writing code, debugging, and using Git for version control. Brian will briefly discuss the different tools available, and demonstrate his preferred setup for Node development on IBM i or any platform. Attend this webinar to learn:

  • SB Profound WP 5539More than ever, there is a demand for IT to deliver innovation. Your IBM i has been an essential part of your business operations for years. However, your organization may struggle to maintain the current system and implement new projects. The thousands of customers we've worked with and surveyed state that expectations regarding the digital footprint and vision of the company are not aligned with the current IT environment.

  • SB HelpSystems ROBOT Generic IBM announced the E1080 servers using the latest Power10 processor in September 2021. The most powerful processor from IBM to date, Power10 is designed to handle the demands of doing business in today’s high-tech atmosphere, including running cloud applications, supporting big data, and managing AI workloads. But what does Power10 mean for your data center? In this recorded webinar, IBMers Dan Sundt and Dylan Boday join IBM Power Champion Tom Huntington for a discussion on why Power10 technology is the right strategic investment if you run IBM i, AIX, or Linux. In this action-packed hour, Tom will share trends from the IBM i and AIX user communities while Dan and Dylan dive into the tech specs for key hardware, including:

  • Magic MarkTRY the one package that solves all your document design and printing challenges on all your platforms. Produce bar code labels, electronic forms, ad hoc reports, and RFID tags – without programming! MarkMagic is the only document design and print solution that combines report writing, WYSIWYG label and forms design, and conditional printing in one integrated product. Make sure your data survives when catastrophe hits. Request your trial now!  Request Now.

  • SB HelpSystems ROBOT GenericForms of ransomware has been around for over 30 years, and with more and more organizations suffering attacks each year, it continues to endure. What has made ransomware such a durable threat and what is the best way to combat it? In order to prevent ransomware, organizations must first understand how it works.

  • SB HelpSystems ROBOT GenericIT security is a top priority for businesses around the world, but most IBM i pros don’t know where to begin—and most cybersecurity experts don’t know IBM i. In this session, Robin Tatam explores the business impact of lax IBM i security, the top vulnerabilities putting IBM i at risk, and the steps you can take to protect your organization. If you’re looking to avoid unexpected downtime or corrupted data, you don’t want to miss this session.

  • SB HelpSystems ROBOT GenericCan you trust all of your users all of the time? A typical end user receives 16 malicious emails each month, but only 17 percent of these phishing campaigns are reported to IT. Once an attack is underway, most organizations won’t discover the breach until six months later. A staggering amount of damage can occur in that time. Despite these risks, 93 percent of organizations are leaving their IBM i systems vulnerable to cybercrime. In this on-demand webinar, IBM i security experts Robin Tatam and Sandi Moore will reveal:

  • FORTRA Disaster protection is vital to every business. Yet, it often consists of patched together procedures that are prone to error. From automatic backups to data encryption to media management, Robot automates the routine (yet often complex) tasks of iSeries backup and recovery, saving you time and money and making the process safer and more reliable. Automate your backups with the Robot Backup and Recovery Solution. Key features include:

  • FORTRAManaging messages on your IBM i can be more than a full-time job if you have to do it manually. Messages need a response and resources must be monitored—often over multiple systems and across platforms. How can you be sure you won’t miss important system events? Automate your message center with the Robot Message Management Solution. Key features include:

  • FORTRAThe thought of printing, distributing, and storing iSeries reports manually may reduce you to tears. Paper and labor costs associated with report generation can spiral out of control. Mountains of paper threaten to swamp your files. Robot automates report bursting, distribution, bundling, and archiving, and offers secure, selective online report viewing. Manage your reports with the Robot Report Management Solution. Key features include:

  • FORTRAFor over 30 years, Robot has been a leader in systems management for IBM i. With batch job creation and scheduling at its core, the Robot Job Scheduling Solution reduces the opportunity for human error and helps you maintain service levels, automating even the biggest, most complex runbooks. Manage your job schedule with the Robot Job Scheduling Solution. Key features include:

  • LANSA Business users want new applications now. Market and regulatory pressures require faster application updates and delivery into production. Your IBM i developers may be approaching retirement, and you see no sure way to fill their positions with experienced developers. In addition, you may be caught between maintaining your existing applications and the uncertainty of moving to something new.

  • LANSAWhen it comes to creating your business applications, there are hundreds of coding platforms and programming languages to choose from. These options range from very complex traditional programming languages to Low-Code platforms where sometimes no traditional coding experience is needed. Download our whitepaper, The Power of Writing Code in a Low-Code Solution, and:

  • LANSASupply Chain is becoming increasingly complex and unpredictable. From raw materials for manufacturing to food supply chains, the journey from source to production to delivery to consumers is marred with inefficiencies, manual processes, shortages, recalls, counterfeits, and scandals. In this webinar, we discuss how:

  • The MC Resource Centers bring you the widest selection of white papers, trial software, and on-demand webcasts for you to choose from. >> Review the list of White Papers, Trial Software or On-Demand Webcast at the MC Press Resource Center. >> Add the items to yru Cart and complet he checkout process and submit

  • Profound Logic Have you been wondering about Node.js? Our free Node.js Webinar Series takes you from total beginner to creating a fully-functional IBM i Node.js business application.

  • SB Profound WC 5536Join us for this hour-long webcast that will explore:

  • Fortra IT managers hoping to find new IBM i talent are discovering that the pool of experienced RPG programmers and operators or administrators with intimate knowledge of the operating system and the applications that run on it is small. This begs the question: How will you manage the platform that supports such a big part of your business? This guide offers strategies and software suggestions to help you plan IT staffing and resources and smooth the transition after your AS/400 talent retires. Read on to learn: