Galleon Group LLC co-founder Raj Rajaratnam should pay more penalties even though he’s already been sentenced to 11 years in prison and fined for insider trading, the U.S. Securities and Exchange Commission said.
Rajaratnam, 54, was ordered to pay a $10 million fine and forfeit $53.8 million at his Oct. 13 sentencing by the federal judge who presided over his criminal trial. He has argued he shouldn’t have to pay any more fines to the SEC because he has “already suffered enormous financial consequences.”
Regulators, who sued Rajaratnam after his 2009 arrest, have said his charitable works shouldn’t be considered in calculating a civil penalty. While his philanthropic activities were taken into consideration for reducing his prison sentence, they are “unpersuasive” in the civil action, the SEC said today in federal court in Manhattan.
“The commission asks that the court primarily consider Rajaratnam’s conduct for which he was convicted, the effects of which ripple beyond the profit gained/losses avoided by Rajaratnam,” Valerie Szczepanik, a lawyer for the SEC, said in the filing. “Rajaratnam’s crimes were serious and wrongful, he continues to refuse to accept responsibility for them.”
U.S. District Judge Jed Rakoff, who is presiding over the SEC case, told lawyers at an Oct. 28 hearing that he expected to issue a ruling on the matter by Nov. 7.
The SEC has argued that Rajaratnam’s penalty in the lawsuit should be tripled to more than $94 million, an amount based on his gains and losses avoided through trades in five stocks after receiving inside information. The former fund manager argues the penalties imposed by U.S. District Judge Richard Holwell, who presided over the criminal case, were “sufficient.”
Rajaratnam’s lawyers disputed the government’s calculation of how much money he earned as a result of the securities fraud and insider tips he received from friends. His lawyers argue that Galleon investors reaped the “majority of the ill-gotten gains” and that he personally only profited by $4.7 million.
The case is SEC v. Rajaratnam, 09-CV-8811, U.S. District Court, Southern District of New York (Manhattan).