Yesterday, U.S. District Judge Jed Rakoff sentenced admitted insider trader Noah Freeman to no time in prison due to his "extraordinary" cooperation with prosecutors. Freeman pleaded guilty to conspiracy and securities fraud charges related to an insider trading ring in 2011. Judge Rakoff further ordered Freeman to forfeit $181,000.
Freeman, a former SAC Capital Advisors LP portfolio manager, is one of eight SAC Capital employees federal prosecutors in Manhattan charged with insider trading who either pleaded guilty or were convicted at trial. Freeman's cooperation helped prosecutors secure convictions of defendants including Winifred Jiau, a former Primary Global Research consultant, and Donald Longueuil, a fellow SAC Capital portfolio manager who was the best man at Freeman's wedding.
Among other things, Freeman assisted prosecutors by recording conversations with Longueuil. This led to some extraordinary evidence for prosecutors such as a now-famous recorded statement by Longueuil about how he disposed of an incriminating "log" of insider information that was on a USB flash drive. Longueuil said he took
two pairs of pliers, and then you rip it open. Pulled the external drives apart. … Put 'em into four separate little baggies, and then at 2 a.m. … 2 a.m. on a Friday night, I put this stuff inside my black North Face … jacket, … and leave the apartment and I go on like a 20 block walk around the city … and try to find a, a garbage truck … and threw the sh*t in the back of like random garbage trucks, different garbage trucks … four different garbage trucks.
Judge Rakoff's leniency in sentencing Freeman appears to be consistent with recent trends. A May 2014 report by law firm Morrison & Foerster ("Cooperation Pays in Insider Trading Enforcement and Sentencing") reviewed insider trading sentences handed down in the four-year period between 2010 and 2013. The report found that cooperators in such cases received an average sentence "equal to 10 percent of the low end of the recommended guidelines range. In contrast, non-cooperating defendants who plea-bargained received sentences equal to 70 percent of the low end of the guidelines range." The report also found that of the fifteen cooperators in insider trading cases sentenced in 2013, eleven received no prison time and the longest prison sentences issued were for one year.