According to Bloomberg News, nearly half of the defendants sentenced for insider trading crimes Manhattan federal court since 2003 have managed to avoid prison because they cooperated with prosecutors. That’s 19 out of the 43 people. The average defendant received a prison sentence of 18.4 months.
How are these insider traders managing to get such light sentences or getting away with not serving any time at all? Cooperating with prosecutors and pleading guilty to insider trading helps. So does suffering from an illness or having to take care of a sick family member. US sentencing guidelines factor in how much of a profit an offender actually made, as well as the defendant’s scope of involvement in the crime. The US Sentencing Commission reports that in 7,617 fraud cases in fiscal 2009, the average sentence was 21.8 months. 94.9% of the cases ended with guilty pleas. 5.1% went to trial.
Bloomberg reports that per a review of government statements put out by the Manhattan U.S. Attorney’s Office since 2003, sentences for many of the insider traders convicted included home confinement or probation. Payment of restitution and fines also were usually required. Insider traders who pleaded guilty generally received sentences of about 14.6 months—although if the case received a lot of media attention, lengthier prison sentences can result.
Of the four insider trading cases since 2003 that did go before a Manhattan jury, one case was thrown out right before sentencing. That said, persons convicted of insider trading generally are sentenced to longer prison terms (on average, the three defendants convicted in court of insider trading received 68 months sentences) than the ones received by those who pleaded guilty. For example, Ex-Credit Suisse Group AG banker Hafiz Muhammad Zubair Naseem was sentenced to 10 years behind bars after a jury convicted him of leading a $7.8 million insider trading scam. Last December, ex-Jefferies Paragon Fund manager Joseph Contorinis was ordered to serve six years in prison for making over $7 million through insider trading.
Related Web Resources:
Insider Defendants Avoid Prison in 44% of N.Y. Cases, Bloomberg, January 19, 2011
Insider Trading, SEC
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