NEW YORK (CBSNewYork/AP) - A former Goldman Sachs and Procter & Gamble Co. board member convicted of insider trading will serve two years in prison, it was announced Wednesday afternoon. He was also fined $5 million.
Prosecutors had sought up to 10 years in prison, while the defense had argued for a sentence of community service.
Rajat Gupta was sentenced for his role in a mammoth insider trading case that prosecutors say was the largest in history. Already, former billionaire hedge fund owner Raj Rajaratnam – a onetime close friend of Gupta originally from Sri Lanka – is serving 11 years in prison for earning up to $75 million illegally.
What are the criminal penalties for insider trading?
It is the Justice Department and local United States attorneys' offices, not the SEC, that have the authority to bring criminal prosecutions. Under Section 32(a) of the Securities Exchange Act of 1934, as amended by the Sarbanes-Oxley Act of 2002, individuals face up to 20 years in prison for criminal securities fraud and/or a fine of up to $5 million for each "willful" violation of the act and the regulations under it. Only fines, not imprisonment, apply if the defendant can demonstrate "no knowledge" of the rule or regulation that is violated. Corporations face penalties of up to $25 million.
In addition, violators are usually charged with mail and wire fraud (which can lead to a sentence of up to 20 years in prison), more general "securities fraud" (up to 25 years in prison), and possibly even racketeering, tax evasion, and/or obstruction of justice. You can also expect civil penalties to result from the SEC's enforcement action.
Prison terms for insider-trading convictions have lengthened in recent years. According to The Wall Street Journal, from 2009 to 2011 the median jail sentence was 30 months, up from a median term of 18 months during the 2000s. From 1993 through 1999, the median length of prison terms was only just under a year.
Originally posted by randomname
really, all insider trading is information. its not theft or fraud.
its like having a friend in a factory tell you not to buy that t.v., because a better one is coming out in 3 weeks.
do you think you should spend 2 years in prison for buying a t.v.
what they should do is revoke these guys trading licences for 10 years and fine the companies that benefit from this trading, $50-100 million on each count.
just like if a mcdonalds employee pisses on your big mac, mcdonalds corp. is held liable, if one of your stock traders acts illegally, the whole corp. is held accountable.
they only difference is that powerful people have a vested interest in financial institutions and a $100 million fine comes out of their profits. while they still profit on insider trading that isn't detected.
they are having their cake and eating it, while the individual stock trader is the patsy who goes to jail if caught.
so nothing will change.
what's funny is that warren buffet became the second richest man in history on trading stocks and information, and they're telling me that in all those decades of 1v1 meetings with ceos, consultations, conferences, board meetings, dinner parties, fundraisers and golf rounds he never got or received information that was not available to you.
ya right. its because he's the "oracle" of omaha and eats cheeseburgers like the rest of us.
edit on 24-10-2012 by randomname because: (no reason given)