Sunday, May 15, 2011

Commentary on Raj Rajaratnam Case

As noted here by Sol Wisenberg, Raj Rajaratnam was found guilty on all counts. Many have been commenting on the case, see here, here, here, here, and here for example. Some predict that this decision will be the stepping stone for future insider trading cases (see here, here , and here)  After all the government might say - the wiretaps seemed to work in this case, perhaps they can work in other insider trading cases.

Hopefully, the government will think this through rationally.  The wiretaps were clearly questionable (see here) (Professor Dershowitz takes a different view  here).  It remains to be seen whether a higher court will find their use acceptable. If there are more prosecutions using these types of wires, and it turns out that a higher court finds them unacceptable -  a lot of time and money will have been wasted by the government. 

A second issue is with respect to what constitutes insider trading and when is the conduct illegal.  The fuzzy nature of this question makes many of these prosecutions questionable. The question I always wonder is if the person knew that the conduct was illegal, would they have committed the act.  If they knew that a heavy jail sentence would be following, would they engage in this activity.  The concern here being that perhaps more time needs to be spent on making criminal offenses clearer and educating folks on what is legal and what is not.

(esp)(blogging from San Francisco)

http://lawprofessors.typepad.com/whitecollarcrime_blog/2011/05/commentary-on-raj-case.html

Insider Trading, Prosecutions, Prosecutors, SEC, Securities | Permalink

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Comments

Yes and yes! I have no insight into insider trading, but have worked felony tax cases for over 10 years. Most of those that commit tax violations/crimes knew what they were doing. Why do they do it then? For the $$$ (greed), pure and simple. They just don't like paying taxes.

As for the jail sentence...some of those we prosecuted do get a few years, but some only get probation. Sometimes with first time offenders, a judge might be more lenient, and dish out probation and/or home monitoring. With time spend in jail, jail overcrowding, etc., many offenders get out sooner than you think.

The question is not whether knowing the penalties would you cheat or not. It's, if you cheat and the chance getting caught is not high, and your jail time is not long, and you're able to earn 40-50% more by not paying certain taxes, would you do it?


IMHO, the criminals do know the law: the tend to ignore and evade it.

"The concern here being that perhaps more time needs to be spent on making criminal offenses clearer and educating folks on what is legal and what is not."

Posted by: Herb | May 16, 2011 12:11:35 PM

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