A New York lawyer disbarred after he pleaded guilty to insider trading charges testified Thursday that envy of Wall Street salaries led him to a role in what became the biggest hedge fund insider trading case in history.
Brien Santarlas was the first major government witness to testify at the second trial that resulted from the investigation that ended in more than two dozen arrests and the conviction last week of Raj Rajaratnam, a one-time billionaire hedge fund founder who became one of America's richest men.
After pleading guilty to securities fraud and conspiracy, Santarlas was testifying in the hopes that he'll win leniency from a potential 25-year prison sentence. The government was counting on his testimony as it builds its case against two stock-trading brothers and a lawyer in a trial expected to last several weeks.
The one-time attorney at the corporate firm Ropes & Gray said he agreed to join the insider-trading scheme after he spoke with a lawyer friend who knew a stock trader willing to pay cash for good tips about mergers and acquisitions.
"While we were making good money, it seemed like nothing compared to the money on Wall Street," Santarlas told jurors.
Santarlas said he made a deal to steal secrets about public companies from the files of other lawyers at his firm. He said he accepted $25,000 in cash after his first big tip about the acquisition of a technology company in September 2007.
He said he spoke with colleagues and rummaged through the computer files of other lawyers at the firm in a search for updates on pending mergers. He said he also watched the printers of lawyers working on the deals in the hopes they would leave paperwork behind.
Before long, he was given a pre-paid cell phone to pass along tips, he said.
Santarlas said he was told that the stock trader who relied on his information made a point to build files containing publicly released information about the same companies he was receiving tips about so it would not appear that he was basing trades on inside information. He said that was not the only safety precautions that were used.
In October 2007, Santarlas said, he was told to cut the pre-paid phone he had been given in half, submerge it in water and throw it in a garbage can.