NEW YORK (Reuters) - A federal appeals court upheld the U.S. Securities and Exchange Commission’s $92.8 million civil fine against convicted Galleon Group hedge fund manager Raj Rajaratnam, nine months after refusing to shorten his 11-year prison term for insider trading.
The 2nd U.S. Circuit Court of Appeals in Manhattan on Tuesday rejected Rajaratnam’s arguments that the SEC penalty was excessive, improperly took his wealth into account and had no deterrent value.
Rajaratnam’s criminal punishment also included a $10 million fine and $53.8 million forfeiture.
Samidh Guha, a lawyer for Rajaratnam, did not immediately respond to requests for comment. The SEC declined to comment.
Rajaratnam, 61, was the highest-profile hedge fund manager among more than 80 defendants who were convicted or pleaded guilty in an insider trading probe led by former U.S. Attorney Preet Bharara.
Prosecutors accused the Sri Lankan native of making up to $63.8 million from 2003 to 2009 by trading illegally in stocks such as eBay Inc, Goldman Sachs Group Inc and Google, now called Alphabet Inc.
A Manhattan jury convicted Rajaratnam in May 2011. The appeals court left his conviction and sentence intact last June 1.
In Tuesday’s 3-0 decision, the appeals court said U.S. District Judge Jed Rakoff did not abuse his discretion in imposing the $92.8 million penalty.
Rajaratnam had argued that federal law capped the penalty at three times the $4.7 million in fees, bonuses and returns he personally stood to gain through his investments in Galleon.
Circuit Judge Gerard Lynch said, however, it was proper to triple the roughly $30.9 million of illegal gains amassed by Rajaratnam in accounts belonging to Galleon and Rajiv Goel, a former Intel Corp executive who provided tips.
“Rajaratnam was motivated to orchestrate not merely a scheme to gain a few million dollars by trading in his own account, but a massive project that gained tens of millions for his clients and associates,” Lynch wrote.
“As Congress recognized, in order to remove that motivation, an appropriate penalty must be keyed to the total scope of the scheme,” the judge added.
Rakoff issued his ruling in November 2011. The SEC case was put on hold for a few years while Rajaratnam appealed his conviction. Rajaratnam is eligible for release in July 2021.
Goel was sentenced to two years probation after testifying against Rajaratnam at trial.
The case is SEC v. Rajaratnam, 2nd U.S. Circuit Court of Appeals, No. 11-5124.
Reporting by Jonathan Stempel in New York; Editing by Steve Orlofsky