An India-born woman, a former Intel executive and a key government informant in hedge fund founder Raj Rajaratnam and former Goldman director Rajat Gupta cases, has been sentenced to one year in prison and fined $1.5 million on insider trading charges.
Roomy Khan, 54, was sentenced in Manhattan federal court yesterday by US District Judge Jed Rakoff to 12 months' imprisonment followed by three years of supervised release. She was also ordered to pay $1.5 million in forfeiture.
Khan, who was born and raised in New Delhi, dabbed tears from her eyes during the sentencing proceeding, where Judge Rakoff credited her with “huge cooperation” in the Rajaratnam probe, which has been touted as the biggest hedge fund insider trading investigation in US history.
According to statements made during Khan's guilty plea proceeding, from 2004 through 2007 she provided Rajaratnam, Whitman and others with inside information relating to several companies, including Polycom and Google.
She allegedly earned $50 million while trading stocks. A Master's in physics from Delhi University, Khan is one among a handful of women who have been charged in the US government's crackdown on insider trading at Wall Street, led by Indian-origin prosecutor Preet Bharara.
Khan had participated in insider trading schemes in which she provided material, non-public information about various publicly-traded companies to a number of individuals, including Rajaratnam and president and founder of Whitman Capital Doug Whitman.
She had pled guilty in October 2009 to securities fraud, conspiracy to commit securities fraud, and obstruction of justice pursuant to a cooperation deal with the US government.
Khan had faced 30 years in prison but defence lawyers and federal prosecutors had sought a lenient sentence for her saying her cooperation led to a number of intercepted phone conversations between Rajaratnam and other top Wall Street executives. Khan's defence team had asked for a term of five years' probation.
Her “extraordinary” and “invaluable” cooperation in the government's crackdown on insider trading had helped secure convictions and guilty pleas of 12 individuals, including that of Rajaratnam, Gupta, McKinsey partner Anil Kumar, former Intel executive Rajiv Goel and Galleon portfolio manager Adam Smith, prosecutors and defence lawyers said.
In a letter to Rakoff prior to Khan's sentencing, Bharara said Khan had identified Rajaratnam as her primary co-conspirator and tippee and provided federal agents with details into how he engaged in insider trading schemes.
Khan also made phone calls to Rajaratnam which were intercepted by the government and during these phone conversations, Rajaratnam made “incriminating admissions” about insider trading.
She had previously pleaded guilty in 2001 to wire fraud and was sentenced in 2002 to home detention after agreeing to cooperate with a federal probe of Rajaratnam in California. She was charged with obstructing justice when, after pleading guilty and agreeing to cooperate with a federal investigation of Rajaratnam, she returned to insider trading and passed the fund manager illegal tips in 2007.
“The message from this court is that you cannot have it both ways, this is too serious,” Rakoff said. “You cannot have it both ways — to cooperate and then, obstruct justice.”
“But the obstruction cannot be ignored; not only what it says about her duplicitous state during that period but also about the very important message that any court needs to send when that cooperation is tainted by obstruction,” Rakoff said. “It wasn't misconduct over a day or two, it wasn't one mistake. It was a whole series of lies.”
The judge ordered Khan to surrender to a federal prison by April 30 and said he would recommend a federal prison in Southern Florida. “I would like to say sorry to the court,” Khan said in court.