Rick Maiman/Bloomberg NewsA prosecutor said Raj Rajaratnam’s prison sentence should send a “message to hedge funds and money managers that insider trading will not be tolerated.”

Federal prosecutors recommended on Tuesday that Raj Rajaratnam, the hedge fund manager convicted of running a huge insider trading scheme, be sentenced to as many as 24 and a half years in prison.

That term is the maximum established for his crime under nonbinding sentencing guidelines, and prosecutors said it was warranted because Mr. Rajaratnam’s “criminal conduct was brazen, arrogant, harmful and pervasive.”

“Such a sentence is necessary to punish Mr. Rajaratnam for his extensive criminal activities, and to send a clear and unambiguous message to hedge funds and money managers that insider trading will not be tolerated,” the government said in a memo sent to Judge Richard J. Holwell, who is scheduled to sentence Mr. Rajaratnam, the former head of the Galleon Group, on Sept. 27.

In May, a jury found Mr. Rajaratnam, 54, guilty of perpetrating a seven-year conspiracy of trading on confidential information about publicly traded companies including Intel and Goldman Sachs. His vast network of informants, some of whom testified against him during his seven-week trial, included investment bankers, management consultants and corporate directors.

Mr. Rajaratnam’s lawyers on Tuesday asked Judge Holwell in a filing for a prison term “substantially below” what the guidelines recommend, but they did not specify the length of the requested sentence. They complained that Mr. Rajaratnam had been unfairly portrayed “as the poster child for every wrongful act that has ever been associated with Wall Street.”

The sentencing of Mr. Rajaratnam will be closely watched in legal circles. If Judge Holwell agrees with the government and sentences Mr. Rajaratnam to 20 or more years in prison, it will be one of the longest prison terms ever for an insider-trading crime. A recent study by Bloomberg News found that of 43 defendants sentenced in federal court in Manhattan for insider trading in the last eight years, the longest sentence was for 10 years, given to a Credit Suisse banker convicted in 2008 for leading a $7.8 million scheme.

Yet Preet S. Bharara, the United States attorney in Manhattan, has made the prosecution of Mr. Rajaratnam — who at his peak was among the world’s most powerful hedge fund managers — the center of his office’s crackdown of insider trading on Wall Street.

Federal authorities used extraordinary tactics, including wiretapping traders’ phones, to build their case against Mr. Rajaratnam and his accomplices.

John M. Dowd, a lawyer for Mr. Rajaratnam, acknowledged in the defense memo that his client was convicted of “serious crimes,” but that “the Raj Rajaratnam who emerges from the evidence before the court — including the hundreds of letters submitted on his behalf — bears scant resemblance to the greedy criminal kingpin the government attempts to portray.”

Mr. Dowd said: “With the sole, and significant, exception of his criminal conviction in this case, the evidence shows that Mr. Rajaratnam lived a life that was not just blameless, but exemplary.” The memo highlighted Mr. Rajaratnam’s more than $45 million in philanthropic gifts, including ones made to the Harlem Children’s Zone.

Echoing a common argument made by lawyers of defendants in insider trading cases, Mr. Dowd said Mr. Rajaratnam’s crimes did not harm anybody. He compared Mr. Rajaratnam’s behavior to that of the top executives at Enron and WorldCom, arguing that his client was “not in the same league” as defendants in those cases because they betrayed their own shareholders and employees, while Mr. Rajaratnam’s crimes had no “single identifiable victim.”

Yet the government’s sentencing memo paints Mr. Rajaratnam as a pernicious figure: “He corrupted old friends. He corrupted subordinates. He corrupted entire markets. Day after day, month after month, year after year, Mr. Rajaratnam operated a billion-dollar force of deception and corruption on Wall Street.”

The defense memo used Mr. Rajaratnam’s health problems in asking for a lenient sentence. A lengthy imprisonment would “seriously threaten his well-being” and would effectively be “a death sentence.” The pleading did not detail Mr. Rajaratnam’s maladies, but described them as “a unique constellation of ailments ravaging his body.” Mr. Rajaratnam had emergency foot surgery during his trial.

Mr. Rajaratnam’s lawyers also argued that their client deserved a lighter sentence because he was “already keenly aware that the consequences of insider trading can include the destruction of one’s business and reputation, exposure to scorn and public obloquy and the complete loss of personal dignity and privacy to government surveillance and the media’s microscope.”

The government in its memo expressed no sympathy for Mr. Rajaratnam, who it said reaped at least $64 million in illegal profits from insider trading, a number that his lawyers dispute. “He is arguably the most egregious violator of the laws against insider trading ever to be caught,” the government said. “He is the modern face of illegal insider trading.”

Prosecution’s Sentencing Memorandum

Defense’s Sentencing Memorandum

Exhibits With Rajaratnam Defense Memorandum

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