A key informant at the heart of the largest insider-trading case in
U.S. history has asked a federal judge for lenient sentencing on her own
crimes, explaining that soaring monthly bills and crumbling finances pressured
her into a return to law-breaking.
Roomy Khan, a former Intel executive who went from Wall Street success
to vilified federal prosecution source, wrote in a newly filed sentencing
letter that she engaged in insider trading from 2004-2007 because she faced
roughly $72,000 in monthly housing and other expenses.
She also faced a threatened bank lawsuit, a separate legal case filed
by her former housekeeper and a decimated investment portfolio, she wrote.
"I was getting desperate to make ends meet," Khan wrote in
the letter to Manhattan U.S. District Court Judge Jed Rakoff, who is scheduled
to sentence her on Thursday. "Slowly, the immorality and unlawfulness of
insider trading was replaced by the desperate need to make money and pay my
mounting bills. Also, the pervasiveness of this habit within most of the Wall
Street professionals I came across made my decision/choices less dubious in my
own mind."
Khan, who has a prior conviction for wire fraud, could face a maximum
prison term of 20 years or more plus millions of dollars in fines based on her
2009 guilty plea to charges of insider trading, conspiracy and obstruction. But
prosecutors are seeking leniency for the India-born informant, even though they
noted in a Jan. 24 sentencing memorandum that she at times lied to
investigators, tipped off suspected co-conspirators and destroyed evidence
while she aided the government.
The prosecution memo cited Khan's major role in helping the government
win the insider-trading conviction of former hedge fund billionaire Raj
Rajaratnam by recording conversations in which the Galleon Group founder
incriminated himself. He's now serving an 11-year prison term. Khan also
testified against Douglas Whitman, a California hedge fund portfolio manager
who was sentenced last week to two years in federal prison for his insider
trading conviction.
The continuing federal probe has generated more than 70 arrests, convictions
or guilty pleas to date.
In a separate defense sentencing memo, Khan attorney Stanislao German
echoed prosecutors by citing his client's "extremely valuable"
cooperation. Khan was deeply involved in aiding government cases that produced
more than $250 million in fines, forfeitures and settlements, along with
multiple convictions, German wrote.
He asked that Khan be sentenced to five years' probation, with no
prison time. Media accounts have referred to her as a "rat," wrote
German. In contrast with the government's victories, the India-born informant
"has lost all of her money, her home, her friends and acquaintances, the
value of her education, and has become an outcast within her own family,"
German wrote.
Ironically, Khan cited some of those same consequences as among the
fears that led her to insider trading.
She said she was living in a costly Atherton, Calif., home with two
mortgages.
"Over time, the shame and ignominy of losing my house and status
in this society became more important than the unlawfulness of insider trading
and the fear of getting caught," she wrote.
Khan reaped approximately $1,525,000 in profits by trading on illegal
insider information in the stocks of Google, Polycom, Hilton Hotels and Kronos,
prosecutors wrote in their sentencing memorandum. Rajaratnam and others to whom
she passed the illegal information collectively gained more than $25 million.
Confronted by the FBI in 2007, she began cooperating. But she wrote
that her financial and personal situation continued a downslide.
She lost a job as a consultant with Trivium Capital Management, a hedge
fund investment adviser. She was sued for alleged back wages by a former
housekeeper, a case which she fabricated a document to help her defense.
Federal investigators discovered that she lied to them about suspected
co-conspirators and destroyed evidence — actions Khan said she took to protect
associates and a relative.
Finally, she suffered a serious leg injury when she was struck by a
taxi that jumped a curb in 2011. The leg still hasn't healed properly, German
wrote.
"Nothing can defend my decisions through that time," wrote
Khan. "All I can say is that I was in the middle of this massive storm
that completely destroyed my life."
Today, she and her family have started over in a town where "no
one really knew us," she wrote, describing her new life in a rental home
as days of cooking, cleaning and other household chores.
"I treat my life now as part of my dues," Khan concluded, adding
she hopes to "gain my self-respect and dignity back."
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