(Bloomberg News) A former Goldman Sachs Group Inc. employee who said he gave away "thousands" of dollars he received from an insider-trading scheme to New York's homeless was sentenced to probation instead of prison.

Gautham Shankar, 38, of New Canaan, Connecticut, who also worked as a trader at Schottenfeld Group LLC, was ordered yesterday by U.S. District Judge Richard Sullivan in New York to serve three years of probation, including the first six months confined to his home.

Shankar, who faced as long as 37 months in prison, collected less than $450,000 in the scheme, his lawyer said. The judge also fined Shankar $25,000 and directed him to forfeit $448,437.

Shankar was one of more than 20 people charged by the U.S. in overlapping insider trading cases involving Galleon Group LLC founder Raj Rajaratnam. Rajaratnam is serving an 11-year prison term after being convicted of 14 counts of conspiracy and securities fraud for trading on inside information.

Shankar, who worked on the sales desk at Goldman Sachs from July 2000 until February 2003, pleaded guilty to conspiracy and securities fraud in October 2009. He admitted that while working at Schottenfeld, he passed and profited from illegal tips he obtained from Zvi Goffer, a former Galleon Group employee, and Thomas Hardin, a former analyst at Lanexa Global Management LP.

Sullivan said it was important to reward Shankar for cooperating early in the government's investigation. Shankar assisted prosecutors for more than a year before the charges were filed, Assistant U.S. Attorney Andrew Fish told Sullivan yesterday.

'Key Variable'

"The key variable for me is not only that you're a good person, but it's that you cooperated early," the judge said. "You did it substantially and you did it in a timely way that allowed the government to pursue investigations."

Shankar's lawyer, Frederick Sosinsky, asked for leniency from the judge, saying yesterday that his client didn't keep a $5,000 payment he received from a co-conspirator as a result of an insider-trading tip and instead gave the money to the homeless.

"As the government learned during its meetings with Mr. Shankar, he has always, quite literally, given large sums of money away to the homeless on the streets of New York, including cash given to him by his co-conspirators for passing tips from Hardin," Sosinsky wrote in a court filing.

"From bringing the homeless a cup of coffee in the morning and sharing time with them to handing them hundreds of dollars at a time, Mr. Shankar has always been unable to simply walk past those in the most distress," Sosinsky said.

'I'm Truly Sorry'

"I'm sorry for the pain that I've caused everybody," Shankar told Sullivan before he was sentenced. "I'm truly sorry for my actions and involvement for the past four years have been difficult."

Sullivan said he was troubled by anecdotes about Shankar's largesse and questioned Shankar's motives for engaging in the scheme.

"'You don't make a charitable donation with insider- trading proceeds," he said. "What he did with his illegal proceeds is less important to me."

During his time at Goldman Sachs, Shankar contacted "buy side" clients and provided research to analysts, his lawyer said in court papers.

Helped Homeless

Shankar's wife, Maureen, asked Sullivan to impose a term of probation, citing her husband's good works. She said Shankar always stopped to speak to the homeless outside Grand Central Terminal during their daily commute into the city and gave shirts and money for a homeless man's surgery.

"One thing I want you to understand about Gautham is that he is not a materialistic, greedy person," Maureen Shankar wrote. "In fact, quite the opposite is true!"

Sosinsky submitted more than 50 letters to the court written on Shankar's behalf, including two from former Goldman Sachs colleagues, three from former Goldman Sachs clients and two by housekeepers who worked for his parents.

"I ask that you show mercy when sentencing Gautham," said Rudy Glocker, a former colleague. "I realize we all must pay for our mistakes, and I know Gautham's atonement is real."

"Gautham and I were in the training program together at Goldman Sachs," said Chris Haroun, a former colleague. "If I could summarize his character in five words, it would be as follows: ethical, kind, minimalist, selfless and generous."

'Substantial' Assistance

Fish said yesterday Shankar provided "substantial" assistance to the Federal Bureau of Investigation's probe of insider trading at hedge funds, resulting in criminal charges being filed against numerous individuals.

When Shankar was approached by the FBI, he "immediately" agreed to cooperate, Fish said. He told investigators about receiving cash from Goffer and David Plate, a former Schottenfeld Group trader, as well as payments he made to Hardin, the prosecutor said.

"He agreed to cooperate in May 2008, when we were in a covert investigation, for more than a year he had to keep this all secret," Fish said. "Mr. Shankar really opened us to a chain of insider-trading prosecutions, so I think he should get some credit for that."

Shankar recorded telephone calls for the FBI with Goffer and his brother, Emanuel Goffer, Plate, trader Michael Kimelman, former Galleon trader Franz Tudor and Hardin, Fish said.

Roomy Khan

Based on Shankar's recordings, Hardin began to cooperate, Fish said, and told the U.S. about tips he obtained from Roomy Khan, a former Intel Corp. executive. Khan later pleaded guilty and became a key cooperator for the government against Rajaratnam.

Hardin also told the U.S. about a separate insider-trading scheme involving Karl Motey, an independent consultant who also pleaded guilty and agreed to cooperate with the U.S., Fish said.

Motey later agreed to work secretly for the FBI, posing as a hedge fund manager and wearing a body wire as part of the federal crackdown of so-called expert networking firms.

Shankar declined to comment after court.

"We're relieved that this chapter of Mr. Shankar's life is over," Sosinsky said.

The case is U.S. v. Shankar, 09-cr-996, U.S. District Court, Southern District of New York (Manhattan).