A Miscellany of Malefactors

Friday, when authorities arrested Raj Rajaratnam and five others in an insider-trading scandal, they called it a first of its kind. But that first-of-its-kind status only applies to the fact that Rajaratnam is a hedge fund boss. Other than that, there have been plenty of insider-trading scandals. Wall Street was rocked by one such scandal in the 1980s, and Martha Stewart was laid low, at least temporarily, as well. Here’s a gallery of some of the people behind the scandals.

by Kent Bernhard, Jr.

Boesky’s sharp eye for spotting takeover deals made him one of the richest men on Wall Street. But in 1986, federal investigators found out an employee at Drexel Burnham Lambert was selling him inside information. Boesky, convicted of securities fraud, paid $100 million in fines in a settlement with the Securities and Exchange Commission and spent two years in prison.

The former junk-bond king of Drexel Burnham Lambert has spent considerable time rehabilitating his rep since he pleaded guilty to six felony counts of securities fraud and conspiracy. He never pleaded guilty to insider trading. He paid $600 million in fines and spent 22 months in prison. He has since emerged as founder of the Milken Institute and as a crusader against prostate cancer.

Worked on takeover strategies at Kidder Peabody and Drexel Burnham Lambert and pleaded guilty in 1987 to charges of insider trading. He admitted that he took cash from Boesky while he was working at Kidder Peabody. In 1990, Siegel was sentenced to two months in prison and five years probation.

As head of Martha Stewart Living Omnimedia, the domestic diva was certainly the most famous person ever caught up in an insider-trading scheme. She was sentenced to five months in prison plus five months of home confinement for lying to federal investigators. She sold 4,000 shares of ImClone stock before the stock tanked. Authorities alleged she was acting on a tip from her friend, ImClone CEO Sam Waksal. The conviction did little to damage Stewart.

The CEO of ImClone, served five years in prison for dumping ImClone stock based on information he had that the FDA would reject his firm’s cancer drug. He can’t be CEO of an American company again, but Waksal’s doing all right. He held onto enough stock to make a pile out of ImClone’s $6.5 billion sale to Eli Lilley.

Winans has proven that there is life after an insider-trading scandal. Winans was the author of the Wall Street Journal’s influential Heard on the Street column and sold information from the column to brokers in advance of its publication. He made only $31,000, but spent eight months in prison for his crime. Since then, though, he has resurrected his career as a ghostwriter.

The billionaire hedge fund operator is accused of being at the center of a web of insider information that led to $20 million in ill-gotten gains trading in tech stocks like Google and Advanced Micro Devices. He was arrested last Friday at his home on the Upper East Side of Manhattan.

A former managing partner at Drexel Burnham Lambert who broke open the scandal of 1980s insider trading by implicating Ivan Boesky in the practice, drew a prison term of two years after pleading guilty to four counts of securities fraud, tax evasion, and perjury. He was fined $362,000.