Court Opinion

ID: 4373693
Source: CourtListenerOpinion
Date Created: 2019-03-05 16:00:15.104534+00
Date Added: 2024-06-11T11:59:32.589315
License: Public Domain

11-5124-cv
SEC v. Rajaratnam

                         UNITED STATES COURT OF APPEALS
                              FOR THE SECOND CIRCUIT

                                   August Term, 2018

                    Argued: November 2, 2018     Decided: March 5, 2019

                                  Docket No. 11-5124-cv

                          SECURITIES AND EXCHANGE COMMISSION,

                                                      Plaintiff-Appellee,

                                        — v. —

                                    RAJ RAJARATNAM,

                                                      Defendant-Appellant,

  GALLEON MANAGEMENT, LP, ALI HARIRI, RAJIV GOEL, ANIL KUMAR, DANIELLE
CHEISI, MARK KURLAND, ROBERT MOFFAT, NEW CASTLE FUNDS LLC, ROOMY KHAN,
 DEEP SHAH, ALI T. FAR, CHOO-BENG LEE, FAR & LEE LLC, SPHERIX CAPITAL LLC,
  ZVI GOFFER, DAVID PLATE, GAUTHAM SHANKAR, SCHOTTENFIELD GROUP LLC,
               STEVEN FORTUNA, S2 CAPITAL MANAGEMENT, LP,

                                                      Defendants.*

*
    The Clerk of Court is respectfully directed to amend the caption as listed above.
B e f o r e:

                    RAGGI, LYNCH, and DRONEY, Circuit Judges

       Defendant-Appellant Raj Rajaratnam appeals from a judgment of the
United States District Court for the Southern District of New York (Rakoff, J.),
ordering him to pay a civil penalty of almost $93 million in a civil suit brought by
the Securities and Exchange Commission. Rajaratnam argues that the district
court committed legal error in interpreting Section 21A of the Securities
Exchange Act as allowing a civil penalty based on profits from trades Rajaratnam
illegally executed but from which he did not personally profit. Rajaratnam also
argues that the district court abused its discretion by failing to consider
Rajaratnam’s criminal punishment and by improperly considering Rajaratnam’s
wealth in determining the amount of the civil penalty. The order of the district
court is AFFIRMED.

                   DAVID LISITZA, Senior Litigation Counsel, Securities and
                        Exchange Commission, Washington, D.C., (Michael A.
                        Conley, Deputy General Counsel, Jacob H. Stillman,
                        Solicitor, Randall W. Quinn, Assistant General Counsel,
                        Paul G. Alvarez, Senior Counsel, Securities and
                        Exchange Commission, Washington, D.C., on the brief)
                        for Plaintiff-Appellee.

                   SAMIDH GUHA, Jones Day, New York, NY (Meir Feder, Ian
                        Samuel, Jones Day, New York, NY, on the brief) for
                        Defendant-Appellant.

                                         2
GERARD E. LYNCH, Circuit Judge:

      In this civil action, filed in the United States District Court for the Southern

District of New York (Jed S. Rakoff, Judge), the Securities and Exchange

Commission (“SEC”) charged defendant-appellant Raj Rajaratnam with insider

trading conduct for which he was criminally prosecuted by the United States

Department of Justice. See United States v. Rajaratnam, 09 Cr. 1184 (S.D.N.Y.

Holwell, J.). After Rajaratnam’s conviction following trial, the SEC moved for

summary judgment in the civil case. As part of its requested relief, the SEC

sought a civil penalty pursuant to Securities Exchange Act Section 21A, 15 U.S.C.

§ 78u-1, which permits the district court to assess a penalty upon a person who

engages in insider trading in an amount “not to exceed three times the profit

gained or loss avoided as a result of such unlawful purchase, sale, or

communication.” Id. at (a)(2). After extensive argument regarding the

appropriate amount of the penalty, the district court entered judgment against

Rajaratnam, imposing a civil penalty of $92,805,705, the maximum permissible

under the statute. Rajaratnam now challenges that award. For the reasons that

follow, we AFFIRM the judgment of the district court.

                                          3
                                 BACKGROUND

      Rajaratnam was the managing general partner and portfolio manager of

Galleon Management, LP, a registered investment adviser, and its affiliated

multi-billion dollar group of hedge funds (collectively, “Galleon”). In 2011,

Rajaratnam was indicted in the Southern District of New York on nine counts of

substantive securities fraud under Securities Act Section 17(a), Exchange Act

Section 10(b), and Exchange Act Rule 10b-5, based on his insider trading in the

stock of five different companies, and five counts of conspiracy to commit insider

trading.

      On the day that Rajaratnam was arrested, the SEC filed a parallel civil

complaint, also in the Southern District of New York, charging Rajaratnam with

the same insider trading conduct alleged in his criminal case. Specifically, the

SEC alleged, among other things, that Rajaratnam’s purchases and sales of stock

in certain companies on the basis of material nonpublic information violated

Securities Act Section 17(a), 15 U.S.C. § 77q(a), Exchange Act Section 10(b), 15

U.S.C. § 78j(b), and Exchange Act Rule 10b-5, 18 C.F.R. § 240.10b-5. The SEC

sought an injunction against further securities law violations, disgorgement of ill-

gotten gains from the violations (plus prejudgment interest), and a civil monetary

                                         4
penalty under Exchange Act Section 21A, 15 U.S.C. § 78u-1 (“Section 21A”).

      Subsection (a)(1) of Section 21A authorizes the SEC to bring a civil action

against a person who violates the insider trading laws. Subsection (a)(2)

concomitantly authorizes the district court to impose a civil penalty “on the

person who committed such violation” in an amount to be determined by the

district court “in light of the facts and circumstances,” but stipulates that such

penalty “shall not exceed three times the profit gained or loss avoided as a result

of such unlawful purchase, sale, or communication.” The SEC’s case before Judge

Rakoff proceeded on a track parallel to the criminal case, before then-Judge

Holwell.

      After an eight-week trial in the criminal case, a jury found Rajaratnam

guilty on all counts charged.1 Specifically, Rajaratnam was found to have

executed trades in Galleon’s accounts and in the account of Rajiv Goel (“Goel”),

an Intel executive who had provided tips to Rajaratnam, in the stock of five

companies on the basis of inside information. The district court sentenced

Rajaratnam to 132 months’ imprisonment and to a $10 million criminal fine. In a

1
 This Court subsequently affirmed Rajaratnam’s conviction. United States v.
Rajaratnam, 719 F.3d 139 (2d Cir. 2013), cert. denied, 134 S. Ct. 2820 (2014).

                                          5
separate proceeding, before Judge Preska, the district court calculated

Rajaratnam’s forfeiture under 18 U.S.C. § 981, and determined that the amount of

the “profits gained (or losses avoided) in Galleon” accounts “as a result of” all of

Rajaratnam’s offenses—both the substantive and conspiracy violations—was

$53.8 million. Supp. App. at 303–04.

      After Rajaratnam’s conviction, the SEC moved for partial summary

judgment in the civil case on its claims of insider trading in the same five stocks

that formed the factual basis for Rajaratnam’s criminal conviction.2 Rajaratnam

conceded that his criminal conviction for insider trading in these five stocks

collaterally estopped him from contesting liability. Rajaratnam did not oppose

entry of a permanent injunction prohibiting him from further violating the

securities laws’ antifraud provisions. The SEC agreed that its demand for $31.6

million in disgorgement was moot in light of the $53.8 million forfeiture order.

Thus, the only issues in dispute on summary judgment were the need for, and

the amount of, the civil penalty.

2
 The SEC advised the district court that it would not proceed to trial to prove
insider trading in any stocks that were not the subject of Rajaratnam’s
substantive securities fraud convictions.

                                          6
      The SEC sought the maximum treble penalty available under the statute. It

argued that such a penalty was warranted because Rajaratnam orchestrated a

multi-year campaign of insider trading, corrupted numerous corporate insiders,

and had taken highly deliberate steps to evade detection. The SEC emphasized

that the high-profile nature of this case would afford the district court “a truly

unique opportunity to send as strong a message as possible to the investment

community, and indeed the world, that insider trading and corruption in

connection with this nation’s capital markets will not be tolerated.” App. at 163.

      In response, Rajaratnam argued that no civil penalty at all was warranted

because of the punishment already meted out in his criminal case: 11 years’

imprisonment, the longest prison term ever imposed for insider trading, a

criminal fine of $10 million, and a $53.8 million order of forfeiture. In the event

that the district court did impose a civil penalty, Rajaratnam argued that the

penalty should be calculated by reference only to the profits Rajaratnam

personally received as a result of the conduct at issue. Those profits,

approximately $4.7 million, came from Rajaratnam’s share of his management

fees and returns on his personal investment in Galleon’s funds.

                                          7
      After hearing oral argument, the district court issued a written decision on

the issue of Rajaratnam’s civil penalty. First, the district court accepted

Rajaratnam’s calculation that the total profit gained and loss avoided by the

illegal trades he executed in Galleon’s and Goel’s accounts on the basis of inside

information was $30,935,235.3 The district court then trebled this number to

impose a civil penalty of $92,805,705.

      The district court concluded that the Section 21A(a)(2) penalty of “three

times the profit gained or loss avoided” was not limited to Rajaratnam’s personal

gains (of around $4.7 million) but, rather, extended to the amount resulting from

the “illegal trades [Rajaratnam] executed.” SEC v. Rajaratnam, 822 F. Supp. 2d
432, 435 (S.D.N.Y. 2011). The district court reasoned that “nothing in the text of

Section 21A” required that the civil penalty be based only on profits Rajaratnam

“personally gained,” that no case law supported limiting the civil penalty

amount to personal gain, and that Rajaratnam’s reading would result in the

3
 Rajaratnam’s $53.8 million criminal forfeiture was based on the “profits (or
losses avoided) in Galleon” accounts “as a result of” all of the offenses
Rajaratnam was charged with in the criminal case—both the substantive and
conspiracy violations. Supp. App. at 303–04. The calculation differed for
Rajaratnam’s civil case because the SEC moved for partial summary judgment on
only the substantive counts of insider trading.

                                          8
“evasion, in effect, of defendant’s responsibility for the wrongdoing he

committed.” Id.

      The district court then decided that imposing a civil penalty of three times

the base amount of profit gained and loss avoided was warranted because “this

case meets every factor favoring trebling”: Rajaratnam’s violations were

egregious; he acted with a high degree of scienter; his conduct created substantial

losses to investors; his conduct continued for years; and he had the ability to pay

a substantial penalty. Id. at 433–34. The district court concluded that “this case

cries out for the kind of civil penalty that will deprive [Rajaratnam] of a material

part of his fortune” given the “huge and brazen nature of Rajaratnam’s insider

trading scheme, which, even by his own estimates, netted tens of millions of

dollars and continued for years.” Id. at 434.

      The district court acknowledged that Rajaratnam had already been

punished in the criminal case, and noted that penalties imposed on a defendant

in a “parallel criminal action may . . . be relevant” to the size of the civil penalty.

Id. But the district court found that the maximum civil penalty was warranted

despite Rajaratnam’s criminal sentence because the focus of criminal punishment

is on moral blameworthiness, by contrast to SEC civil penalties, which are

                                           9
designed to effect general deterrence and to make insider trading a money-losing

proposition.

      Rajaratnam timely appealed from the district court’s final judgment.

                                    DISCUSSION

      Rajaratnam raises two arguments on appeal. First, he argues that the civil

penalty for insider trading under Section 21A may not exceed three times his own

profit gained or loss avoided. Second, he argues that the district court abused its

discretion in imposing the maximum penalty under the statute, because it

improperly relied on his wealth to justify the penalty, and failed to consider the

criminal penalties already imposed on him.

      We review the district court’s ruling on the former question, a matter of

statutory interpretation, de novo. See Ehrenfeld v. Mahfouz, 489 F.3d 542, 547 (2d

Cir. 2007). We review its decision on the latter question, the appropriateness of

the district court’s selection of a civil penalty, for abuse of discretion. See SEC v.

Pentagon Capital Mgmt. PLC, 725 F.3d 279, 287 (2d Cir. 2013). “[T]he burden of

showing that the [district] court abused [its] discretion . . . necessarily is a heavy

one.” SEC v. Manor Nursing Ctrs., Inc., 458 F.2d 1082, 1100 (2d Cir. 1972). “Under

this standard, we will reverse only if we have a definite and firm conviction that

                                           10
the court below committed a clear error of judgment in the conclusion that it

reached upon a weighing of the relevant factors.” SEC v. Bankosky, 716 F.3d 45, 47

(2d Cir. 2013) (internal quotations omitted).

I.    The Section 21A Treble Damages Provision

      The district court calculated the base amount of Rajaratnam’s civil penalty

by using Rajaratnam’s calculation of the “profit gained or loss avoided” as a

result of the illegal trades he executed, even though the pecuniary gain from

those trades went mostly to Galleon’s and Goel’s accounts. Rajaratnam argues

that the district court erred because the maximum penalty under Section 21A is

“three times the profit gained or loss avoided” by the defendant, and that the

penalty should therefore be calculated with reference only to the $4.7 million he

personally realized from his management fees, bonuses, and investment returns

from Galleon. Rajaratnam claims that the statute’s text, structure, legislative

history, and purpose support his contention.4 We disagree.

4
 The SEC argues that Rajaratnam waived this argument by failing to raise it
before the district court. Whether or not Rajaratnam adequately raised the issue
before the district court, it is properly before us because the district court
expressly decided the question of whether “the SEC’s figure should be reduced
to the amount [Rajaratnam] personally gained.” Rajaratnam, 822 F. Supp. 2d at
435; see United States v. Harrell, 268 F.3d 141, 146 (2d Cir. 2001) (considering issue
because court below resolved it); Stevens v. Dep’t of Treasury, 500 U.S. 1, 8 (1991)

                                          11
       Section 21A permits the SEC to bring an action against Rajaratnam, as “the

person who committed” a violation by “purchasing or selling” securities on the

basis of inside information. Id. at (a)(1). Subsection (a)(2) provides that:

                 The amount of the penalty which may be imposed on the
                 person who committed such violation shall be determined
                 by the court in light of the facts and circumstances, but
                 shall not exceed three times the profit gained or loss
                 avoided as a result of such unlawful purchase, sale, or
                 communication.

Id. at (a)(2).

       Rajaratnam argues that because subsection (a)(2) does not identify who

must gain profit or avoid losses, the civil penalty calculation must be limited to

the violator’s personal profit.5 But a plain reading of subsection (a)(2) indicates

(concluding that “issue [was] properly before” the reviewing court because the
court below “decided the substantive issue”).
5
 Rajaratnam points us to United States v. Contorinis, 692 F.3d 136 (2d Cir. 2012),
where we held that the defendant could not be ordered to forfeit, pursuant to 18
U.S.C. § 981(a)(2)(b), profits that he never received or possessed. Id. at 145. We
noted that the forfeiture statute did not expressly identify who must do the
acquiring that results in forfeiture. Id. at 146. Rajaratnam argues that because
Section 21A(a)(2), like § 981(a)(2)(b), does not identify who must profit, the Court
should hold that the relevant amount here is Rajaratnam’s own “profit gained or
loss avoided.” But the reasoning of Contorinis does not apply here.
       In Contorinis, we interpreted the forfeiture statute in light of the meaning of
the word “forfeiture.” 692 F.3d at 146. We held that someone could not be
ordered to forfeit profits that he never received or possessed because “forfeiture”
generally connotes a person’s losing an entitlement as a penalty for proscribed

                                            12
that it permits a civil penalty to be based on the total profit resulting from the

conduct. Id. Contorinis, therefore, could not be ordered to forfeit the profits that
the Government sought because such profits were in the possession of the
beneficiary fund over which Contorinis entirely lacked control. Id. But even in
that context, we noted that the general rule that forfeiture relates to the
defendant’s own gains is “somewhat modified by the principle that a court may
order a defendant to forfeit proceeds received by others who participated jointly
in the crime, provided the actions generating those proceeds were reasonably
foreseeable to the defendant.” Id. at 147. Nothing in the idea of a civil penalty,
which is designed to deter future violations, implies a comparable limitation to
funds in the immediate possession of the violator.
        In any event, Rajaratnam’s case has already been distinguished from
Contorinis on its facts. See Rajaratnam v. United States, 736 F. App’x 279 (2d Cir.
2018). After this Court decided Contorinis, Rajaratnam sought coram nobis relief
on the grounds that his criminal forfeiture order under 18 U.S.C. § 981 was not
limited to his own profits. Id. at 283. This Court, by summary order, denied relief
on the grounds that in Contorinis, the defendant portfolio manager did not
control disbursement of the profits of the beneficiary fund of his inside trading,
and he did not personally receive or possess the profits realized by the
beneficiary fund from his inside trading. See id. By contrast, we noted that in this
case:
              Rajaratnam was the founder and managing general
              partner of Galleon and, as such, exercised control over
              both that firm and the proceeds it acquired, including the
              proceeds acquired as a result of his insider trading. Even
              if those proceeds subsequently were distributed to
              investors, with Rajaratnam personally retaining only a
              percentage as management fees, he nonetheless had
              authority over disbursements, and, thus, exercised control
              over the proceeds at some point.
Id. at 283–84 (quoting Contorinis, 692 F.3d at 147).
      Thus, even in the context of forfeiture itself, Contorinis did not control this
case. Still less does it have any application to the civil penalty at issue here.

                                           13
violation. See SEC v. Rosenthal, 650 F.3d 156, 160 (2d Cir. 2011) (holding that the

maximum penalty under Section 21A is based on the “profitability of the

violation”) (emphasis added); SEC v. Anticevic, No. 05-cv-6991, 2010 WL 2077196,

at *8 (S.D.N.Y. May 14, 2010) (imposing a civil penalty of three times the total

profits earned through the inside trader’s scheme, not just the profits he earned

himself). Because Rajaratnam “executed” Galleon’s and Goel’s “illegal trades,”

Rajaratnam, 822 F. Supp. 2d at 435, his civil penalty can be calculated under

subsection (a)(2) based on Galleon’s and Goel’s “profit gained or loss avoided as

a result of [Rajaratnam’s] unlawful purchase[s] [and] sale[s],” Section 21A(a)(2).

      Our interpretation of the statute is confirmed by the fact that elsewhere in

the federal securities laws Congress expressly limited the “amount of the

penalty” for particular violations to the “gross amount of pecuniary gain to such

defendant as a result of the violation.” See, e.g., Securities Act Section 20(d)(2), 15

U.S.C. §§ 77t(d)(2)(A), (B), (C); Exchange Act Section 21(d), 15 U.S.C.

§§ 78u(d)(3)(B)(I), (ii), (iii); Investment Company Act of 1940 Section 42(e), 15

U.S.C. §§ 80a-41(e)(2)(A), (B), (C); Investment Advisers Act of 1940 Section 209(e),

15 U.S.C. §§ 80b-9(e)(2)(A), (B), (C) (emphasis added). Rajaratnam’s reading of

Section 21A(a)(2) thus contravenes the rule that “[w]here Congress includes

                                           14
particular language in one section of a statute but omits it in another section of

the same Act, it is generally presumed that Congress acted intentionally and

purposely in the disparate inclusion and exclusion.” Russello v. United States, 464
U.S. 16, 23 (1983).

      Nor can Rajaratnam’s interpretation of Section 21A be reconciled with how

the statute treats tippers who do not themselves trade or otherwise receive

pecuniary gain for their tips. Subsection (a)(1) makes tippers who unlawfully

communicate inside information “violat[ors]” eligible for a civil penalty.

Subsection (a)(2) then provides for the imposition of a civil penalty on “the

person who committed such violation” (including the tipper who does not

himself trade) in an amount up to three times the profit gained or loss avoided

“as a result of such unlawful purchase, sale, or communication.”Id. (emphasis

added). The only possible “profit gained or loss avoided” by a “communication”

of inside information by a non-trading tipper would result from the trading of

the tipper’s tippee(s). Accordingly, subsection (a)(2) necessarily permits a

violator’s civil penalty to be calculated based on the third parties’ profit gained or

loss avoided, i.e., the profits gained or loss avoided from the defendant’s

                                         15
violation.6 See, e.g., SEC v. Warde, 151 F.3d 42, 49 (2d Cir. 1998); SEC v. Gupta, No.

11 Civ. 7566(JSR), 2013 WL 3784138, at *2 & n.4 (S.D.N.Y. July 17, 2013) (imposing

treble civil penalty on tipper for “total” trading gains), aff’d 569 F. App’x 45 (2d

Cir. 2014).

      Further, we are unpersuaded by Rajaratnam’s argument that the

deterrence purpose of Section 21A is served only if the base amount of the

penalty is the amount of profit earned by the defendant. As we explained in SEC

v. Contorinis, 743 F.3d 296, 303 (2d Cir. 2014), cert. denied, 136 S. Ct. 531 (2015), in

affirming a disgorgement award of profits channeled to friends, family, and

clients, “[w]hether the defendant’s motive is direct economic profit, self-

aggrandizement, psychic satisfaction from benefitting a loved one, or future

profits by enhancing one’s reputation as a successful fund manager, the insider

trader who trades for another’s account has engaged in a fraud, secured a benefit

6
 The legislative history confirms that Section 21A was “intended to permit
penalties to be imposed upon both insider traders and tippers.” H.R. Rep. 100-
910, at *18-*20. Congress noted that, like the “purchase or sale of securities” on
the basis of inside information, the “communication of [] advance inside
knowledge to others who trade while in possession of that information similarly
poses serious problems for the fair and honest operation of our securities
markets.” Id. at *8.

                                            16
thereby, and directed the profits of the fraud where he has chosen them to go.”7

The purpose of Section 21A is to deter the whole of the conduct Rajaratnam

engaged in by exacting a penalty for it. That Rajaratnam’s insider trading

produced a direct traceable increase of only $4.7 million in his own bank account

is not a convincing reason to limit the amount of his penalty, because it is

“difficult to quantify the advantages of an enhanced reputation,” psychic

satisfaction, and self-aggrandizement for an insider trader. Contorinis, 743 F.3d at

306. Rajaratnam was motivated to orchestrate not merely a scheme to gain a few

million dollars by trading in his own account, but a massive project that gained

tens of millions for his clients and associates. As Congress recognized, in order to

remove that motivation, an appropriate penalty must be keyed to the total scope

of the scheme.

7
  Whereas United States v. Contorinis, see infra note 5, held that a criminal
defendant could not be ordered to forfeit profits he never had, SEC v. Contorinis,
regarding the same defendant, distinguished between the purposes of criminal
forfeiture and civil disgorgement, and held that “an insider trader who trades on
behalf of another person or entity using funds he does not own, and thus
produces illegal profits that he does not personally realize, can nevertheless be
required to disgorge the full amount of the illicit profit he generates from his
illegal and fraudulent actions,” 743 F.3d at 299. Civil disgorgement was not
appropriate here in light of Rajaratnam’s $53.8 million in criminal forfeiture, but
we conclude that, like civil disgorgement, civil penalties may be awarded on the
basis of the full amount of illegal profits generated.

                                         17
II.   The District Court’s Discretion in Setting the Penalty

      Rajaratnam next argues that, whatever the statutory maximum, the district

court abused its discretion in setting the amount of the penalty because the

district court impermissibly relied on the defendant’s wealth and refused to

consider the deterrent effect of the criminal penalties already imposed on him.

We reject those arguments, which distort the district court’s actual reasoning.

      Section 21A(a)(2) authorizes federal courts to impose civil penalties for

insider trading violations in amounts “determined by the court in light of the

facts and circumstances.” The district court noted that this was a broad mandate,

and cited the factors from SEC v. Haligiannis, 470 F. Supp. 2d 373, 386 (S.D.N.Y.

2007), which courts frequently consider in setting such penalties, including “(1)

the egregiousness of the defendant’s conduct; (2) the degree of the defendant’s

scienter; (3) whether the defendant’s conduct created substantial losses or the risk

of substantial losses to other persons; (4) whether the defendant’s conduct was

isolated or recurrent; and (5) whether the penalty should be reduced due to the

defendant’s demonstrated current and future financial condition.” Rajaratnam,
822 F. Supp. 2d at 433. The district court then held that every factor favoring

trebling is present here. Id. at 434. Rajaratnam does not contend that these factors

                                         18
were not appropriately considered, and (with only one exception, discussed

below) does not seriously dispute the district court’s conclusion – with which we

agree – that each of these favors the use of a treble penalty.

      A.     The District Court’s Consideration of Rajaratnam’s Wealth

      Rajaratnam claims that the district court impermissibly justified its

imposition of a massive penalty on the basis of Rajaratnam’s wealth. He

maintains that only one of the Haligiannis factors touches on the defendant’s

wealth, and that factor provides only for mitigation, not aggravation. He argues

that these factors allow no room for the use of a defendant’s financial status to

increase the penalty imposed on him.

      While the Haligiannis factors have been considered in several cases, see SEC

v. Gupta, 569 F. App’x 45, 48 (2d Cir. 2014); SEC v. Milligan, 436 F. App’x 1, 2 (2d

Cir. 2011); SEC v. Rosenthal, 426 F. App’x 1, 2 (2d Cir. 2011), they have not been

deemed an exhaustive list by this Court and are not to be taken as talismanic. We

have never held that it is impermissible for a district court to consider a

defendant’s wealth in imposing a civil penalty. In fact, other circuits have

explicitly approved the consideration of a defendant’s wealth in imposing a civil

penalty under Section 21A. See, e.g., SEC v. Lipson, 278 F.3d 656, 665 (7th Cir.

                                         19
2002) (upholding the district court’s discretion to impose a treble civil penalty

given the defendant’s wealth); cf. SEC v. Warren, 534 F.3d 1368, 1370 (11th Cir.

2008) (holding it permissible for the district court to consider the defendant’s

wealth in setting a civil penalty); SEC v. Sargent, 329 F.3d 34, 42 (1st Cir. 2003)

(considering defendant’s financial worth in determining whether to assess civil

penalties). And we have held it is permissible to do the same in imposing a

criminal fine under the Sentencing Guidelines. See United States v. Zukerman, 897
F.3d 423, 431 (2d Cir. 2018) (“[A] defendant’s wealth is relevant in determining

whether a particular fine will deter illegal conduct . . . [because a] fine can only be

an effective deterrent if it is painful to pay, and whether a given dollar amount

hurts to cough up depends upon the wealth of the person paying it.”).

      We thus have no hesitation in concluding that, in calculating the size of a

penalty necessary to deter misconduct, the extent of a defendant’s wealth is a

relevant consideration. A fine that would be significantly painful to a person of

modest means might be a mere slap on the wrist or “cost of doing business” to a

wealthier offender. Rajaratnam contends, however, that the district court’s use of

this factor was motivated by a bare desire to strip Rajaratnam of his wealth, much

of which, it is undisputed, was earned legitimately. We do not question that a

                                          20
vindictive bias against or hostility towards persons of means would be an

inappropriate consideration in setting a penalty for securities fraud. But the

suggestion that the district court here was so motivated distorts the record, and

ignores the court’s careful and thoughtful analysis of the factors bearing on the

appropriate penalty.

      Rajaratnam points to the district court’s statement that “this case cries out

for the kind of civil penalty that will deprive this defendant of a material part of

his fortune.” Rajaratnam, 822 F. Supp. 2d at 434. But read in context, it is clear that

the district court had already concluded that the brazenness, scope, and duration

of Rajaratnam’s insider trading warranted a significant penalty. A review of the

record as a whole, including the transcript from the hearing before the district

court on the amount of the penalty, reveals that the district court was concerned

with whether “it [was] realistically likely that [Rajaratnam would] be able to

pay.” App. at 324. The district court made clear that it did not want to enter a

“symbolic” judgment that lacked a “reasonable possibility it gets paid.” App. at

324–25. The district court accepted Rajaratnam’s invitation to review the portion

of the Pre-Sentence Report from his criminal case that set forth his net worth, and

then concluded (in what, after reviewing that Report, we regard as an

                                          21
understatement) that his net worth “considerably exceed[ed] the financial

penalties imposed in the criminal case,” Rajaratnam, 822 F. Supp. 2d at 434,

leaving him in a position to be able to pay the civil penalty.8 In short, we find no

legal error or abuse of discretion in the district court’s consideration of

Rajaratnam’s wealth in connection with determining the size of the civil penalty.

      B.     The District Court’s Consideration of Rajaratnam’s Criminal
             Penalties

      Rajaratnam also asserts that the district court improperly refused to take

any account of the other penalties to which he had already been subjected. But

again the record reflects otherwise. The district court explicitly noted that

8
  Rajaratnam also emphasizes a reference by the district judge, at oral argument,
to a statement of former SEC Chairman Richard Breeden “who, on the subject of
insider trading, said he wanted to leave the insider traders something like
worthless, homeless, and maybe clothesless.” App. at 327. But this reference too
is taken out of context. Judges at oral argument frequently put forward ideas or
comment to elicit the views of counsel for the parties. The Breeden quotation
does not figure in the district court’s written explanation of its reasoning for
selecting a penalty. Thus, we understand the court’s reference to Breeden’s
comment as the expression of a strong view that, in the end, the court did not
adopt. That the judge expressed concern with whether Rajaratnam would
actually be able to pay, or the SEC to collect, whatever penalty would be imposed
makes clear that he was not looking to impose a fine that would meet or exceed
Rajaratnam’s resources and leave him penniless. Finally, the court’s review of the
Pre-Sentence Report made clear that the penalty imposed would have no such
effect, and that even after paying the fine, Rajaratnam and his family would still
possess significant wealth.

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Rajaratnam was sentenced to 11 years in prison, was ordered to forfeit $53.8

million, and was fined an additional $10 million in criminal penalties. It went on

to recognize that the penalties in a “parallel criminal action may . . . be relevant”

in determining whether to impose a civil penalty. Rajaratnam, 822 F. Supp. 2d at

434. But the district court found that in light of the facts and circumstances of this

case, the civil penalty here had to be set at a level that would show, not just to

Rajaratnam, but to all those who consider it, that such lucrative insider trading is

a “money-losing proposition.” Id.

      That the district court did not ultimately offset the amount of the civil

penalty against the extent of Rajaratnam’s criminal punishment does not mean

that the district court did not consider those punishments, still less that it abused

its discretion. Section 21A provides that a civil action brought by the SEC for a

civil penalty “may be brought in addition to any other actions that the

Commission or the Attorney General are entitled to bring.” Section 21A(d)(3)

(titled “Remedy not exclusive”) (emphasis added). Thus, Congress expressly

anticipated that at least some insider traders would face both criminal and civil

penalties. See Gupta, 569 F. App’x at 48 (rejecting Gupta’s argument that a treble

penalty was inappropriate in light of criminal penalties already imposed).

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      Rajaratnam points to cases in which district courts refrained from ordering

the maximum civil penalty based, in part, on the fact that separate criminal

penalties had been imposed as a result of the defendant’s conduct. But Section

21A tasks district courts with imposing a penalty “in light of the facts and

circumstances” of each defendant’s particular case. In some circumstances it may

be appropriate to offset the penalty by a defendant’s criminal punishment; in

others, not. Given the district court’s latitude under the statute, and its

conclusions about Rajaratnam’s conduct, we cannot say that the district court

abused its discretion in imposing the maximum civil penalty on Rajaratnam even

though he had already received a significant criminal sentence.

                                  CONCLUSION

      For the reasons stated above, we AFFIRM the order of the district court.

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