By Nate Raymond
NEW YORK, Jan 31 (Reuters) - Roomy Khan, a one-time
technology company executive who became a key FBI informant in
the insider-trading case against hedge-fund manager Raj
Rajaratnam, was sentenced to 12 months in prison on Thursday.
Her defense lawyer had sought five years of probation for
Khan, 54, who pleaded guilty in 2009 to securities fraud,
obstruction of justice and conspiracy. U.S. District Judge Jed
Rakoff in Manhattan also ordered her to forfeit nearly $1.53
"As I reflect back, I am horrified by the choices I made,"
Khan is one of only a few women who have been charged in the
government's broad insider-trading crackdown, which has involved
money managers, traders, consultants and lawyers.
Her cooperation helped U.S. authorities in the Rajaratnam
prosecution. Rajaratnam, founder of the Galleon Group, was
convicted by a federal jury in May 2011 and is serving an
11-year prison term.
She was also called as a government witnesses at the insider
trading trial of Doug Whitman, a California hedge fund manager
and founder of Whitman Capital LLC who was sentenced last week
to two years in prison.
Prosecutors said Khan also obstructed the investigation,
alerting co-conspirators that the U.S. Securities and Exchange
Commission had contacted her and deleting email communications.
Khan, whose voice broke up during her sentencing, said she
was sorry, not just to the court but also to her daughter,
husband and parents.
She said she lied to the government to protect herself, her
friends and family and that she engaged in insider trading to
"protect my life and status."
Since August 2009, federal prosecutors in New York have
charged 76 people with insider trading and have landed
convictions against 71 of them.
By the end of Thursday, 42 of them will have been sentenced.
Jason Pflaum, a former analyst at the hedge fund Barai Capital
Management who cooperated in the Justice Department's probe of
expert-network firms, was sentenced later on Thursday to time
served plus two years probation.
Prosecutors said Khan met Rajaratnam shortly after landing a
job as a marketing executive at Intel Corp in 1995. They contend
that when Rajaratnam started Galleon, she began giving him
non-public information about Intel.
The FBI in San Francisco approached soon after. She was
sentenced in 2002 to three years probation after pleading guilty
to a count of wire fraud and reaching a cooperation agreement.
Khan worked at Galleon but left to manage her and her
husband's personal portfolio.
Prosecutors said in a sentencing memo filed on Friday that
beginning in 2004, Khan again began soliciting non-public tips
and trading on them. They said she also began exchanging her
tips with other contacts and that she gave tips to Rajaratnam
Prosecutors attributed Khan's insider trading to personal
financial difficulties. Her lawyer said in a court filing on
Monday that she lost $49.6 million of her money when the
Internet bubble burst.
She began cooperating with the government in 2007 after the
Federal Bureau of Investigation approached her. Her assistance
led to a 2008 wiretap of Rajaratnam's cell phone, which
prosecutors said led to further evidence.
Stanislao German, Khan's lawyer, acknowledged "bumps along
the way" with regard to her obstruction of the investigation.
"For self-serving and other reasons she tried to be
double-faced," Rakoff said. "That's not a very sympathetic
Rakoff also sentenced Khan to three years supervised release
following her prison term. She previously agreed in 2010 to pay
$1.86 million to settle an SEC civil lawsuit.
The case is United States v. Khan, U.S. District Court,
Southern District of New York, 09-991.
For the United States: Christopher LaVigne and Jilliam
Berman of the U.S. Attorney's Office in Manhattan.
For Khan: Stanislao German of the Law Office of Stanislao A.
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