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Categorized | Financial

Rajaratnam informant sentenced to one year

Posted on January 31, 2013

Roomy Khan, a trader-turned-government informant who helped authorities build insider trading cases against Raj Rajaratnam and more than a dozen other Wall Street figures, was sentenced to one year in prison.

Prosecutors asked the judge for leniency citing Khan’s “extremely substantial” co-operation but they also told the judge that her repeated lies about the depths of her involvement in insider trading, deletion of emails, and tip-offs to sources about the government probe “negatively impacted” the ongoing investigations. Her lawyer asked for probation.

    The sentence was longer than other cooperators who avoided prison time, but likely reflected her past skirmishes with the legal system. Khan was first convicted of insider-trading in 2002 and lied to law enforcement officials after agreeing to co-operate in 2007. Prosecutors said Khan continues to assist them on open cases.

    A native of India, Khan was a late bloomer on Wall Street. She earned masters degrees in Physics and electrical engineering in the US before going to business school. When she landed a marketing job at Intel in its Silicon Valley office, Khan began sharing confidential information with Mr Rajaratnam, founder of Galleon Group.

    Mr Rajaratnam was convictedof insider trading and is serving an 11 year prison term.

    “It was her eager desire to work in Wall Street coupled by her belief that she was considered ‘old’ to begin a career at a financial services firm that led to her passing insider information to Raj Rajaratnam in the late 1990s,” her lawyer said in a letter to the judge. Khan pleaded guilty in 2002. She received three years probation.

    An active trader, Khan personal portfolio was valued at $50m at its peak, but her lawyer says when the internet bubble burst in early 2000, she lost 99.2 per cent of her money.

    With mounting bills, Khan got a job at Trivium Capital, a hedge fund, and for the second time began illegally trading on inside information with Mr Rajaratnam and others.

    In a letter to the judge, Khan said “the shame and ignominy of losing my house and status in this society became more important than the unlawfulness of insider trading and the fear of getting caught.”

    She was approached by the FBI in 2007 and agreed to secretly record phone conversations for more than a year. She was not a witness in Mr Rajaratnam’s trial, but did testify for the government against Doug Whitman, a portfolio manager who was convicted of insider trading.