Jail time for insider information, obstructing justice.
Bureau Report
NEW YORK: Roomy Khan, a central figure in the investigation that led to the conviction of the hedge fund manager Raj Rajaratnam, was sentenced to one year in prison for illegally passing inside information and obstructing justice, reported The New York Times.
Despite the assistance that Khan had provided prosecutors in the case against Rajaratnam, her actions — in particular, lying to federal investigators — were serious enough to merit a prison term, said Judge Jed S. Rakoff of the Federal District Court in Manhattan.
“You cannot have it both ways,” Judge Rakoff said. “You cannot obstruct justice and then say, ‘Well, because I’ve done good things since, forget about it.’ ”
The punishment, he said, sends a “very important message” about the consequences of hindering a government investigation.
Khan, 54, a onetime Intel executive who later worked at the Galleon Group, will not appeal the sentence, said her lawyer, Stanislao A. German. But he said he considered the punishment unduly severe, said the Times report.
“I understand the judge’s reasoning and logic,” German said. “But considering the individuals who went to trial got two years, I think one year for Ms. Khan is a lot.”
In a separate case not directly related, Jason Pflaum, a witness who gathered evidence about his former boss, the hedge fund manager Samir Barai, was sentenced to two years of probation.
Pflaum, who pleaded guilty in 2010 to securities fraud and conspiracy to commit securities fraud, had helped prosecutors secure a guilty plea from Barai on insider trading charges. He also helped with the conviction of Winifred Jiau, a former consultant for an expert network firm, prosecutors said.
The government’s sweeping investigation into insider trading has relied heavily on cooperating witnesses to build its cases. Investigators have pressed these people for information about their colleagues, and also have had many of them secretly record phone calls — or wear wires — to obtain incriminating evidence. Virtually all of those who cooperated have received sentences of probation, which does not involve a prison term, said the Times.
Khan, who had sought five years of probation, pleaded guilty in 2009 to conspiracy to commit securities fraud and securities fraud, a charge that carried a maximum prison sentence of 20 years. She also admitted to lying to agents at the Federal Bureau of Investigation.
Preet Bharara, the United States attorney in Manhattan, had said Khan’s cooperation was “extremely substantial,” in a letter to Judge Rakoff before the sentencing. Prosecutors said the information Khan provided allowed the government to secure a wiretap of Rajaratnam’s cellphone.
Still, in addition to lying under oath, Khan destroyed evidence and tipped off co-conspirators about an investigation by the Securities and Exchange Commission, prosecutors said, said the Times.