First jail term for New Castle executive caught in ‘largest insider trading’ scam

A FORMER senior executive at a $US1 billion ($1.2 billion) hedge fund investment firm has been jailed for more than two years in the first sentencing to result from what prosecutors have called the largest hedge fund insider trading case in history.

Mark Kurland, 61, of Mount Kisco, New York, was sentenced yesterday to two years and three months in prison and ordered to forfeit the $US900,000 ($1.1 million) he made through illegal trades.

US district judge Victor Marrero said Kurland, a co-founder of New Castle Partners hedge fund in Manhattan, “frankly should have known better” than to join an inside trading scheme that led to the arrests of executives including one-time billionaire Raj Rajaratnam.

He blamed the attitudes of people like Kurland for the country’s financial collapse two years ago.  “He had a choice as a leader of the financial industry,” Mr Marrero said.  “He could have led by example. Instead, he chose to follow.  “He became a joiner, surrendering to a spree of mob mentality that nearly brought down this country’s financial industry.”

Kurland, who had pleaded guilty to conspiracy to commit securities fraud and securities fraud, was among 11 people who have pleaded guilty in the case.  Many of the others had agreed to co-operate with the Government, a step that delays their sentencing.  Mr Rajaratnam, the portfolio manager for the Galleon Group hedge fund, has pleaded not guilty and disputed government claims he pocketed as much as $US50 million through a network of cheating executives at financial firms and companies privy to inside information.

The judge criticised pleas for leniency on Kurland’s behalf on the grounds that he had a minimal role, that he did not benefit much financially, that others were more at fault and that there was no real harm to the markets.  “To some extent, this country’s financial meltdown was manifested precisely by the attitudes expressed by Mr Kurland in this proceeding,” the judge said.  Before he was sentenced, Kurland said his crime had “destroyed my reputation and everything I have worked hard for my entire life”.

He said he was “heartbroken and profoundly ashamed”, and conceded he should have known better.  “The void left by the sudden end of my career will never end,” he said.

Kurland said his torment was “unimaginable and very painful”.  At his plea, Kurland admitted engaging in insider trading between August 2008 and January 2009, after receiving tips about confidential information involving three companies.  New Castle Partners operated as the equity hedge fund group of Bear Stearns Asset Management until its parent company was acquired in March 2008 by JPMorgan Chase.  In January 2009, New Castle Partners ended its affiliation with JPMorgan and formed a new hedge fund, New Castle Partners LP.

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