Hedge fund manager's sentence 'too lenient'
A federal appeals court in Boston yesterday overturned a sentence given to a hedge fund manager convicted of insider trading, agreeing with prosecutors that 36 months of probation was "unreasonably lenient."
Michael Tom, 38, of Waltham, was sentenced in 2006 after pleading guilty to illegally making more than $750,000 in insider trading profits.
Prosecutors said a Citizens Financial Group Inc. employee allegedly tipped Tom in 2004 to the company's plans to acquire Charter One Financial Inc.
Tom, who managed and partly owned a Burlington-based hedge fund called GTC Growth Fund, then traded aggressively in Charter One securities, making 52 purchases of common stock and call options contracts, prosecutors said. He made the trades in his own name, as well as on behalf of GTC Growth Fund and his relatives, authorities said.
On May 4, 2004, Citizens said it intended to acquire Charter One. The next day, Tom sold most of the Charter One securities he had purchased for a profit of about $750,000, authorities said.
US District Judge Reginald Lindsay sentenced Tom to 36 months of probation, which included six months in a community confinement center. Prosecutors appealed that sentence, saying the low end of federal sentencing guidelines for Tom's crimes called for was 37 months imprisonment.
Lindsay declined to sentence Tom to prison time, saying Tom was less culpable than a codefendant who provided the insider information and had received a sentence of 12 months of probation by a different judge.
The judge also noted that Tom was subject to sanctions by the Securities and Exchange Commission and that a prison sentence would be over-punishment.
But the 1st US Circuit Court of Appeals said Lindsay's sentence was too lenient. "We agree with the government that the sentence is unreasonable and that it did not give adequate consideration to the seriousness of the offense, the need for general deterrence for white-collar crimes, and the need for some imprisonment," the court said in its written ruling.
The court remanded the case to the lower court for resentencing.
Tom's lawyer, Mark Pearlstein, did not immediately return a call seeking comment yesterday.
Acting US Attorney Michael Loucks said the appeals court made the right decision in concluding that penalties such as a fine or loss of license from a regulatory body should not "weigh heavily" in criminal sentencing decisions.
