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A notorious Florida investor who feigned cooperation with the government even as she initially told lies in one of the biggest insider trading investigations was sentenced to a year in prison Thursday by a judge who said that cooperators who lie must be punished, even if they eventually provide substantial assistance.
Roomy Khan, 54, of Fort Lauderdale, Fla., dabbed tears from her eyes during the sentencing proceeding in U.S. District Court in Manhattan, where Judge Jed Rakoff credited Khan with "huge cooperation" in a probe prosecutors have repeatedly touted as the biggest hedge fund insider trading investigation in history.
He said, though, that he could not overlook the lies she initially told investigators to protect friends before she told the truth. Her cooperation played a role in enabling the largest use of wiretaps ever in an insider trading investigation, along with the dozens of convictions that followed.
"You cannot obstruct justice and say: 'Well, because I've done good, forget all else,'" the judge said. He said no prison sentence would send the wrong message, though he noted that a year in prison was significantly less than the decade she could have faced if she had not cooperated.
Prior to the announcement of the sentence, Kahn fought back tears as she apologized, saying she had been "ostracized by most of my family and friends and lead my life as a pariah in isolation."
She said she alone was responsible for her plight.
"I lied to the government to protect myself, my friends and family from getting in trouble. To protect my life and status, I engaged in insider trading," she said.
"As I reflect back, I am horrified at the choices I made," she said. "No amount of financial hardships or duress justifies the decisions I took."
As part of a prior deal with the Securities and Exchange Commission to resolve civil charges, she also must give up $1.8 million in profits. A consent order calls for her to pay $1.55 million in profits and an additional $304,398 in interest.
Khan has admitted she conspired from 2004 through November 2007 to trade inside information. She pleaded guilty in 2009 to conspiracy, securities fraud and obstruction of justice and agreed to cooperate.
The probe she aided has resulted in more than two dozen convictions, including a guilty verdict against one-time billionaire hedge fund founder Raj Rajaratnam, who is serving an 11-year prison sentence after the government said he earned as much as $75 million illegally.
At a trial last year of a San Francisco hedge fund boss, Khan testified that she began feeding secrets to Rajaratnam 15 years earlier when she lived in California and worked at Intel Corp. in marketing. She later worked for him for a time.
In April 2001, Khan pleaded guilty to wire fraud charges after signing a cooperation agreement with the government. She was not sentenced to prison.
Within a few years, the collapse of technology stocks had caused her to lose much of the nearly $50 million she had made, leaving her struggling to pay the mortgage on her $5 million Atherton, Calif., home.
She testified that she resumed using inside information to make stock trades between 2005 and 2007, obtaining early quarterly earnings results and feeding them to others.