New York jury weighs fate of ex-Galleon trader and 2 others

Reuters News
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Posted: Jun 02, 2011 4:38 PM
New York jury weighs fate of ex-Galleon trader and 2 others

By Jonathan Stempel

NEW YORK (Reuters) - Jurors began weighing whether three former traders schemed to trade on leaks about pending mergers and then cover their tracks, in the U.S. government's second major insider trading trial of the year.

A Manhattan federal jury began deliberations Thursday afternoon to decide whether one-time Galleon Group hedge fund employee Zvi Goffer and two other defendants conspired to trade on tips about pending mergers from lawyers then working at the law firm Ropes & Gray.

Galleon Group founder Raj Rajaratnam was found guilty on all counts last month in the biggest insider trading probe in decades. The former tycoon could face at least 15 years in prison when he is sentenced in New York in July.

Prosecutors say Goffer was the ringleader of a scheme to improperly benefit his firm Incremental Capital LLC, which he started with the other defendants, his brother Emanuel Goffer and Michael Kimelman, after he was fired from Galleon in August 2008.

The government based its case heavily on evidence from wiretapped phone calls, and has said the Goffers communicated on prepaid cellphones that they later destroyed.

In closing arguments earlier in the day, Assistant U.S. Attorney Andrew Fish said the defendants traded on information that ordinary investors do not have, and looked for "corruptible people" to help them carry out their scheme.

Four people who pleaded guilty in the case cooperated with prosecutors and testified against the defendants.

"In the end, this is a case about corruption," Fish said. "These guys wanted to make millions of dollars.

But Michael Sommer, a lawyer for Kimelman, said his client did "genuine and honest work," and that the government case was misleading.

"You deserve to get it straight," Sommer told jurors in his closing argument on Thursday. "People's futures are at stake."

Lawyers for the Goffers gave their closing arguments on Wednesday. After the government concluded its argument, U.S. District Judge Richard Sullivan instructed jurors on the law.

Prosecutors said the alleged scheme involved tips on Bain Capital Partners LP's and Huawei Technologies Co Ltd's failed takeover of computer network equipment maker 3Com Corp, and private equity firm TPG Capital LP's takeover of Canadian drug company Axcan Pharma Inc.

Zvi Goffer, 34, pleaded not guilty to 12 counts of securities fraud and two counts of conspiracy.

Emanuel Goffer, 32, and Kimelman, 40, each pleaded not guilty to two counts of securities fraud and one count of conspiracy. The defendants face as much as 25 years in prison if convicted.

During the trial, their lawyers had tried to show that government witnesses were not credible, and that the people who leaked the tips had a fiduciary duty not to do so, a key element of insider trading.

The trial began on May 16, five days after a different Manhattan federal jury found Zvi Goffer's former boss at Galleon, Rajaratnam, guilty on all 14 securities fraud and conspiracy charges in a separate insider trading trial.

Rajaratnam is the most prominent defendant in an insider trading crackdown in which roughly 50 people have been charged. More than three dozen have pleaded guilty, and Rajaratnam is so far the only one convicted at trial.

The case is U.S. v. Goffer et al, U.S. District Court, Southern District of New York, No. 10-00056.

(Reporting by Jonathan Stempel in New York, editing by Matthew Lewis)