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14 charged in insider trading case in US - Naveed Yaseen - 11-06-2009 06:27 AM
NEW YORK (November 06 2009): Federal prosecutors say criminal charges have been filed against 14 people, including attorneys and Wall Street professionals, in a widening $25 million insider trading case that has already snared one of the richest men in America.
According to court papers filed in US District Court in Manhattan, Zvi Goffer operated an insider trading network in 2007 and 2008 that included a lawyer who fed tips gleaned from his firm's work on acquisition deals. Goffer worked at Shottenfeld Group LLC in Manhattan in 2007 and at Galleon Group for the first nine months of 2008 before he started his own trading firm, the papers said.
Last month, authorities arrested Galleon Group founder Raj Rajaratnam and five others in an insider trading scheme that the Securities and Exchange Commission estimated produced $25 million in profits for its participants. A bail hearing for Sri Lankan-born Rajaratnam, who is free on $100 million bail, was scheduled for later Thursday.
Rajaratnam has denied through his lawyer participating in the scheme to use inside information to trade stocks at a profit ahead of public announcements. In court papers, new details about the alleged scheme emerged to show how the government built its case.
The papers put Goffer in a central role. It was not immediately clear who would represent him at an initial court appearance. A criminal complaint prepared by FBI Agent David Makol said Goffer paid others to obtain secrets about public companies' planned merger and acquisition activity that he then used to execute profitable securities trades. The complaint said Goffer provided conspirators with prepaid cellular telephones so they could communicate in a way that reduced their chance of detection by law enforcement.
Among those who fed him tips that reached Goffer was Arthur Cutillo, a lawyer with Ropes & Gray, a law firm that held secrets regarding mergers and acquisitions, the complaint said. The tips included information about the announcement in September 2007 that Bain Capital Partners LLC would acquire 3Com, a technology company, the court papers said.
According to the complaint, Cutillo fed tips to another lawyer, Jason Goldfarb, who relayed them to Goffer. In a statement, Ropes & Gray said it was ``deeply disappointed to learn about this situation, which suggests an extreme breach of this person's duty of trust to our clients and to the firm.'
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