Galleon, SAC Cooperator Spared Prison at Insider Sentencing

A former hedge fund analyst who played a crucial role helping the U.S. build insider-trading cases tied to Galleon Group LLC co-founder Raj Rajaratnam and SAC Capital Advisors LP was spared prison after prosecutors cited his “extraordinary” cooperation.

Thomas Hardin, 37, spent more than six years working with Federal Bureau of Investigation agents, even before hiring a lawyer or getting a formal cooperation agreement with the U.S.

Prosecutors said he “consistently provided quality information that contributed in significant part to dozens of insider-trading convictions” that led to at least 20 people being charged by the U.S.

“The past six years have been the most shameful and most difficult of my life,” Hardin told U.S. District Judge Laura Taylor Swain in Manhattan Wednesday before she announced his sentence.

“The actions that brought me here today were selfish and inexcusable,” Hardin said. “I am deeply sorry for the mistakes I’ve made and I am deeply humbled and ashamed. I hope your honor can see that I’ve left my old life behind.”

Hardin, a graduate of the University of Pennsylvania’s Wharton School of Business, was an analyst at Lanexa Global Management LP when agents asked him in July 2008 to secretly record conversations with friends and colleagues engaged in illegal trading, Larry Krantz, Hardin’s lawyer, said in court papers.

Tipper X

Before he was publicly identified, Hardin became known as “Tipper X” for his role as the link between insider rings at Galleon and Schottenfeld Group LLC.

Swain cited Hardin’s aid in building cases for the U.S. as a reason for sparing him from prison. She noted that Hardin lost his job and was barred from the securities industry as a result of the case.

“His reaction has had profound implications for law enforcement,” the judge said. “His conviction alone and the course of his life in the past six years should serve as a firm deterrent message to others who are tempted to take the path to illegality.”

Swain ordered Hardin to forfeit $46,743 and said she wouldn’t impose any fine.

Hardin was a friend of Roomy Khan, the former Intel Corp. executive who was a key government witness against Rajaratnam, prosecutors said. After Khan agreed to secretly cooperate with the U.S. against Rajaratnam in late 2007, prosecutors said Hardin provided evidence that showed Khan was lying to agents and obstructing federal investigations, according to the U.S.

Galleon Trader

Hardin described getting nonpublic information from Gautham Shankar, a former Schottenfeld trader, which led the FBI to former Galleon trader Zvi Goffer and a separate insider-trading ring, according to the government.

Rajaratnam is serving an 11-year prison term after being convicted of insider trading while Goffer was imprisoned in 2011 for trading on tips leaked by lawyers.

Hardin also provided the U.S. with information about crimes committed by Wesley Wang, who worked at SAC Capital’s Sigma Capital unit, both Krantz and prosecutors said. Hardin’s cooperation led to cases against Wang and at least three others, the lawyers said. Wang pleaded guilty and agreed to cooperate with the U.S.

Krantz said Hardin helped agents develop leads about Galleon and SAC Capital. He also explained how Primary Global Research, an expert-networking firm, allowed technology company employees moonlighting for PGR to pass tips to hedge funds for a fee.

Secret Recordings

Hardin agreed to secretly record telephone calls and conversations he had with Khan and Wang, prosecutors said.

“Without Hardin’s cooperation (which led to the development of other cooperating witnesses), the government may have never uncovered the expert insider-trading ring network that led to 20 convictions alone,” prosecutor Parvin Moyne said in a letter to the court.

At least five former PGR employees or consultants who Hardin provided information about later agreed to plead guilty and cooperate with the U.S., Krantz said.

The case is U.S. v. Hardin, 10-cr-00399, U.S. District Court, Southern District of New York (Manhattan).

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE