NEW YORK – A FEDERAL judge demanded the government explain itself on Wednesday for eavesdropping on phone calls between an insider trading defendant and his wife in a case that was celebrated for its use of wiretaps.
US District Judge Richard Sullivan in Manhattan ruled in favour of the government’s right to wiretap insider trading suspects, but drew the line at the private chats between a husband and wife, saying it was the only area where he believed some suppression of the evidence might be warranted. He was the second judge to rule in favour of wiretap evidence in insider trading cases.
Judge Sullivan ordered the government to respond in writing to claims by a lawyer for defendant Craig Drimal that 13 per cent of his time on phones involved chats with his wife, including ‘deeply personal conversations about private marital matters.’ Drimal has pleaded not guilty.
Prosecutors have described the prosecution that resulted in Drimal’s 2009 arrest as the biggest hedge fund insider trading case in history. Among defendants is Raj Rajaratnam, a one-time billionaire founder of the Galleon group of hedge funds who has pleaded not guilty and insisted any trades he made were based on publicly known information. Prosecutors say the insider trading resulted in more than US$50 million (S$64.6 million) in profits.
The government began wiretapping Drimal, a former Galleon trader, in November 2007. His lawyer, Janeanne Murray, said in court papers that 98.2 per cent of the calls captured by the government and 97.4 per cent of the call-minutes involved non-pertinent conversations.
Ms Murray accused the government of a ‘cavalier disregard for marital privacy,’ saying investigators were required to discontinue monitoring if they discovered that they were intercepting a personal communication solely between Drimal and his wife. — AP
PARIS (AFP) – Industrial espionage that targeted Renault posed a serious threat to the French carmaker’s “strategic assets”, the company said on Thursday.
Renault said on Wednesday that it had suspended three managers for leaking secrets about its electric cars.
This decision was to “protect, without delay, the strategic, intellectual and technological assets of our company,” senior vice president Christian Husson told AFP.
“For Renault, this is a very serious incident concerning persons in a particularly strategic position in the company,” he said.
A months-long probe had established a “body of evidence which shows that the actions of these three colleagues were contrary to the ethics of Renault and knowingly and deliberately placed at risk the company’s assets,” said Husson.
Renault has staked its future on electric cars as automakers face up to rising demand for more environmentally friendly methods of transport.
The suspensions were the latest in a series of industrial espionage scandals to hit France’s huge and strategically important auto industry.
French Industry Minister Eric Besson warned on Thursday that the country was facing “economic war” in the light of the espionage at Renault.
You may not believe to see it but Rupert Murdoch‘s British tabloid News of the World has rules.
The paper suspended assistant editor Ian Edmondson yesterday for approving hacking into the voice mail of Sienna Miller.
According to Bloomberg the suspension came after Miller alleged in a lawsuit that Edmondson had “approved a contract with an investigator to eavesdrop on personal messages between her, her friends and business associates” and paid him $3,900 to do so.
This is just the latest in a tabloid phone-hacking scandal that has plagued Britain in recent months, and reached all the way to the British family.
NEW YORK, Jan 6 (Reuters Legal) – The recent flurry of insider-trading arrests by the Manhattan U.S. Attorney has set Wall Street on edge. But if recent history is any guide, people found guilty of that crime tend to get off relatively easy, a Reuters Legal analysis suggests.
The analysis covers sentences imposed in 2009 and 2010 in 15 insider-trading cases brought by the U.S. Attorney in New York, representing virtually all those imposed in that court during this period. Of these, 13 sentences, or nearly 87 percent, were lighter than the terms prescribed by the U.S. Sentencing Guidelines — and seven of the sentences carried no prison time at all. The data from 2009, culled from a report issued last year by law firm Morrison Foerster, reveal that only one prison term, for 63 months, was issued for insider trading in 2009.
The routine practice of departing downward from the guidelines in insider-trading cases is particularly striking given the much lower rate at which judges in the New York federal court typically do so. According to U.S. Sentencing Commission statistics from fiscal 2009, New York federal judges departed downward from the guidelines in 57 percent of all cases, a full 30 percentage points lower than for insider-trading cases alone.
To be sure, several defendants charged in connection to Manhattan U.S. Attorney Preet Bharara’s massive insider-trading investigation have yet to be sentenced. In fact, two of the biggest targets — Galleon Group hedge fund founder Raj Rajaratnam and former New Castle Funds employee Danielle Chiesi — have not yet gone to trial. If either is found guilty, the guidelines would call for severe sentences: A maximum of 145 years in prison for Rajaratnam, whose trial is scheduled for February, and a maximum of 155 years for Chiesi.
Defense lawyers and former prosecutors have several theories about why insider-trading sentences tend to be lighter than those prescribed by the federal guidelines. For one, judges in the Southern District of New York, who oversee most of the insider-trading cases filed nationwide, depart downward from the guidelines at a more frequent rate than do judges across the country. According to the Sentencing Commission, in fiscal 2009 42 percent of all sentences nationwide were below the guidelines, compared to the 57 percent of all sentences issued by judges in the Southern District.
Another theory is that insider-trading defendants more commonly present the sentencing judge with glowing character references from friends, family, and colleagues, and these are often effective in persuading judges that a short prison term would be a sufficient deterrent. And unlike cases involving violent crimes or other types of white-collar crimes such as Ponzi schemes and shareholder fraud, insider-trading, which no doubt harms the investing public, typically doesn’t produce anyone to deliver heart-tugging victim-impact statements to the judge.
“You’re not going to get a big presentation about how peoples’ lives were ruined,” said Sam Buell, a professor at Duke University School of Law and a former federal prosecutor. “In insider-trading cases, where are the victims?”
DIFFICULT CALLS FOR JUDGES
At a sentencing hearing in February 2009, U.S. District Judge Alvin Hellerstein spoke about the difficulties he faced when sentencing individuals guilty of insider trading, which he described as “serious” but also “peculiar.” “It’s taking advantage of inside information, theoretically, at the expense of the public,” he said. “But there are no victims in this crime, at least not in any real sense.”
The case involved Alan Tucker, a former Pace University professor who in 2008 had pleaded guilty to conspiracy to commit securities fraud. Under the sentencing guidelines, Tucker faced 37 to 46 months. At the hearing, Judge Hellerstein struggled to find the appropriate punishment for Tucker, noting that Tucker was an accomplished academic and that he has a son who suffers from autism. Judge Hellerstein sentenced Tucker to six months in prison, but subsequently reduced the term to three years’ probation.
GUIDELINES NOT MANDATORY
The federal guidelines, which went into effect in 1987, were meant to bring more consistency to sentencing, and over the years, penalties have stiffened for white-collar defendants. The guidelines are based on a point system in which a first-time offender guilty of insider trading automatically gets eight points — or a prison sentence range of zero to six months. Additional points are based on the amount the defendant gained by the illegal trading — which can quickly add up to stiff sentences. A defendant who made more than $200,000, for example, faces between 33 and 41 months under the guidelines. For a gain of more than $1 million, the range increases to 51 to 63 months.
But under the Supreme Court’s 2005 decision in United States v. Booker, district court judges are no longer bound by the guidelines. Now, they’re only required to consult them.
Cooperation with the government in ongoing investigations may also help defendants receive lighter sentences than those called for by the guidelines. Last year, U.S. District Judge Sidney Stein sentenced a trader who faced 46 to 57 months under the guidelines to three years probation, citing his cooperation with the government.
But cooperation with the government is not always necessary to get a good deal. In the last two years, at least eight defendants received shorter sentences even though they did not cooperate with the government. Only two of the seven who received sentences below the guidelines had cooperated with the government.
James Gansman, a former Ernst Young partner accused of giving inside information to a female companion, fought his charges through a trial. After a jury convicted him in 2009, he faced a prison sentence of 41 to 51 months under the guidelines. But last year, U.S. District Judge Miriam Goldman Cedarbaum sentenced Gansman to one year and one day, noting that Gansman did not personally gain from the trading. Gansman has appealed the conviction.
Defense lawyers are now using these lighter sentences to try to set a new benchmark for insider-trading defendants who don’t cooperate with the government. In June, lawyers for Ali Hariri, a former executive at Atheros Communications who pleaded guilty to insider trading in connection with the government’s Galleon Group investigation, pointed to more than a dozen individuals who didn’t cooperate with the authorities yet who received sentences below the federal guidelines. Hariri’s lawyers argued that in order to “avoid disparity among defendants guilty of similar conduct,” Hariri should also receive a sentence below the guidelines, which call for a prison term of 24 to 30 months.
In November, U.S. District Judge Richard Holwell sentenced Hariri to 18 months in prison.
(Reporting by Andrew Longstreth; Editing by Eric Effron and Amy Stevens)
FRANCE is the country that conducts the most industrial espionage on other European countries, even ahead of China and Russia, said leaked US diplomatic cables quoted today by Norway’s Aftenposten.
“French espionage is so widespread that the damages (it causes) the German economy are larger as a whole than those caused by China or Russia,” an undated note from the US embassy in Berlin said, according to a Norwegian translation by Aftenposten.
The Norwegian daily of reference said last month it had obtained all the 250,000 US diplomatic cables WikiLeaks had accessed and would publish stories based on them independently of the whistleblowing website’s own releases.
Its article based on leaked cables included an October 2009 comment from Berry Smutny, the head of German satellite company OHB Technology, quoted in the diplomatic note.
“France is the Empire of Evil in terms of technology theft, and Germany knows it,” a Norwegian translation of Smutny’s comment in the cable read.
OHB Technology became known to the general public in January 2010 when it obtained a contract for the construction of several satellites for the Galileo satellite navigation system, a much-delayed European challenger to the American-developed Global Positioning System (GPS).
The small German firm won the bid for the contract over Astrium, a subsidiary of pan-European giant EADS.
A leaked US cable posted yesterday by Aftenposten described Franco-German competition in terms of spy satellite development.
The cable said Germany was developing, with the help of the US, its own High Resolution Optical Satellite System (HiROS), despite the objections of France, which is leading pan-European efforts in the field with its Helios satellites.
