Galleon Group LLC co-founder, Raj Rajaratnam must pay a $92.8 million penalty, a record, in a case brought on by the SEC, according to a judge. The 54 year old was sentenced to 11 years in prison, the longest for insider trading in U.S. history.

Rajaratnam believes he should be free of additional civil penalties in the case, claiming that he has already experienced enough suffering after the order from U.S. District Judge Richard Holwell to pay a $10 million fine and forfeit close to $54 million in addition to his prison term.

U.S. District Judge Jed Rakoff sided with the SEC Monday in New York, issuing an order for a judgement without trial. Rakoff said he reviewed the pre-sentencing report prior to his decision, at the request of Rajaratnam’s lawyer. According to Rakoff, Rajaratnam has a net worth that “considerably exceeds the financial penalties imposed in the criminal case.”

“When to this is added the huge and brazen nature of Rajaratnam’s insider trading scheme, which, even by his own estimate, netted tens of millions of dollars and continued for years, this case cries out for the kind of civil penalty that will deprive this defendant of a material part of his fortune,” Rakoff said in his order.

An SEC lawyer stated yesterday that the agency hopes to question “one or both” of Rajaratnam’s brothers under oath for the lawsuit against Rajat Gupta. Gupta is the former Goldman Sachs Group, Inc. director who was accused of tipping off Rajaratnam.

U.S. News and World Report has provided seven suggestions for avoiding financial product scams. While there are plenty of great opportunities out there, these tips might make the difference in saving you from a scam.

1. Never say yes immediately

Think through your decision instead of signing up immediately when you hear about something that sounds like a great idea.

2. Be skeptical

Ask plenty of questions. Don’t feel pressured to make a decision until you are completely satisfied with the answers you are given.

3. Ask the same questions in different ways

If the person you are speaking to is telling the truth, their answer will not change. By changing the wording of your question, you have a better chance of understanding exactly what you are getting yourself into. The more times you ask the question, the more information you will be given regarding the question.

4. Figure out intentions

Will you decision have financial consequences for the other party? Advice from a person that will benefit from you signing up is not the free from bias advice you should be seeking. A person that will benefit from your action is not the best person to receive advice from.

5. Find a sounding board

Speak to as many informed people as possible. Each person can give you input from a different perspective and better prepare you to make an optimal decision.

6. Find at least one alternative

Compare a potential investment to other similar opportunities once you decide it is something you want to do. While the investment might be a great idea, there could be another company offering a competitive solution that will work even better for you. If you decide your original solution is the best, you can rest easy knowing you made your comparisons.

7. Thank the person who gave you the suggestion

If you decide the investment is worth your while, take the time to thank the person who passed the information your way. As long as you are benefiting from it, other people making money off of your decisions is OK.

Former director at Goldman Sachs and Procter & Gamble pleads not guilty
Posted on October 27, 2011 by Securities Information Source

Rajat Gupta, 62

The former director at Goldman Sachs and Procter & Gamble, Rajat K. Gupta, pleaded not guilty in charges of insider trading. The federal grand jury charged Gupta with one count of conspiracy to commit securities fraud and five counts of securities fraud. He is also accused of sharing corporate secrets about the companies with Raj Rajaratnam, who earlier this month was sentenced to 11 years in prison for insider trading.

“Rajat Gupta was entrusted by some of the premier institutions of American business to sit inside their boardrooms, among their executives and directors, and receive their confidential information so that he could give advice and counsel for the benefit of their shareholders,” Preet Bharara, the United States attorney in Manhattan, said in a statement. “As alleged, he broke that trust and instead became the illegal eyes and ears in the boardroom for his friend and business associate, Raj Rajaratnam, who reaped enormous profits from Mr. Gupta’s breach of duty.”

Gupta pleaded not guilty to all charges. According to New York Times, he will be released on a $10 million bond to his home in Westport, Connecticut where he will be required to hand over his passport.

“The facts in this case demonstrate that Mr. Gupta is innocent of any of these charges and that he has always acted with honesty and integrity,” Gary P. Naftalis, a lawyer for Mr. Gupta, said in a statement.

The case is set for trial on April 9, 2012. A Manhattan federal judge, Judge Jed S. Rakoff, is assigned to the case.

According to investment news, the government has charged 56 people with swapping illegal tips in the last two years. 51 of those have either pleaded guilty or been convicted.

See full story from NY Times

The security regulators of NASAA (North American Securities Administrators Association) have compiled a list of the”Top 10 financial products and practices that threaten to trap unwary investors.”

The list includes the following products:

Distressed Real Estate Schemes
Energy Investments
Gold and Precious Metals
Promissory Notes
Securitized Life Settlement Contracts
The list includes the following practices:

Affinity Fraud
Bogus or Exaggerated Credentials
Mirror Trading
Private Placements
Securities and Investment Advice Offered by Unlicensed Agents
Details about these investor traps can be found at the NASAA website: http://www.nasaa.org/investor_education/nasaa_fraud_center/8943.cfm