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Hedge Fund Exec Sentenced to 11 Years

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http://hosted.ap.org/dynamic/stories/U/US_HEDGE_FUND_INSIDER_TRADING?SITE=WYCHE&SECTION=HOME&TEMPLATE=DEFAULT

"Rajaratnam's punishment fell far short of the 24 1/2 years prosecutors had requested."

"sentenced Thursday to 11 years behind bars - the stiffest punishment ever handed out for the crime."

"Rajaratnam's lawyers had argued for 6 1/2 to nine years. Defense attorney Terence Lynam asked the judge to show compassion because of Rajaratnam's illnesses, saying: "He does not deserve to die in prison."

"The Rajaratnam probe relied heavily on the most extensive use of wiretaps ever for a white-collar case. Prosecutors captured conversations in which he and his accomplices could be heard gleefully celebrating their inside information."

So basically this guy has been sentenced to die in prison because he is wealthy and violated some undefined and unmentioned standard of what equals "inside trading".

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Let's assume this behavior should not be criminal. Here are a couple questions though:

  • was this Rajaratam guy doing the moral thing?
  • assuming a world where this was not criminal, ought he to be liable under civil case brought by companies whose information he tried to procure?

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Let's assume this behavior should not be criminal. Here are a couple questions though:

  • was this Rajaratam guy doing the moral thing?
  • assuming a world where this was not criminal, ought he to be liable under civil case brought by companies whose information he tried to procure?

Was he getting private info from other companies by unlawful means? If so then probably. All I get out of reading articles in the media though are vague accusations of "insider trading".
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Was he getting private info from other companies by unlawful means?
He is accused of was getting information private information about companies, from employees. Some of his sources were extremely high-placed ex classmates from his Wharton MBA days. If true, it is likely that the employment contracts of those sources did not allow the information to be divulged, and the accused would be aware of that.

An example would be something like this. A director in Company X calls Raj after a board meeting and says: "The CEO disclosed that the company is going to get a huge investment from Buffett; the public announcement will be made after the market closes this evening." Then, Raj acts on this information by trading in the company's stock.

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Not knowing many specifics, in general I think if a legitimate contract is broken, repercussions should ensue. Still, breaking a contract might be moral, given some circumstances. So then, to generalize an immoral scenario, if one has honest business relationships, one should not use them to the "advantage" of dishonest gain. Still, in that immoral scenario, legality might not come into play -- they would only mix if legit law breaking coincided with dishonest business dealings.

In this story's case, if no legitimate legal obligations were broken, the government has no business doing anything about it. My comment was a reaction to a guy losing 11 years of his life, and his career, because of insider trading laws. If he really is a sleezeball, I wouldn't defend him personally, but I would still defend the principle of repealing bad laws, and not punishing people with government force for being sleezeballs.

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