The second trial to result from a massive investigation into insider trading at hedge funds ended Monday with the conviction of a trio of Wall Street traders on charges they paid hefty bribes to coax confidential information out of shady lawyers.
A jury reached the verdict against stock trader Zvi Goffer and two others in federal court in Manhattan after deliberating five days since June 2. It came a month after the conviction of Raj Rajaratnam, the one-time billionaire who founded the Galleon Group of hedge funds and who was once Goffer's boss.
Goffer, his brother Emanuel and Michael Kimelman were convicted of conspiracy to break securities laws. The men were permitted to remain free on bail pending sentencing, set for the fall.
The defendants, who had insisted they based trades only on public information, remained calm during the verdict. Zvi Goffer's wife and mother left the courtroom in tears.
David Pettus, a lawyer for Zvi Goffer, said the verdict was a disappointment and would be appealed.
"Zvi's a very young man, not a person likely to get in trouble again," he said. "We'll prepare the best sentencing arguments we can prepare."
Michael Sommer, a lawyer for Kimelman, said: "We are enormously disappointed with the verdict as we believed the evidence clearly showed that Mr. Kimelman had not engaged in any insider trading. We will of course pursue all avenues of appeal."
Michael Ross, a lawyer for Emanuel Goffer, declined to comment.
U.S. Attorney Preet Bharara said the investigation of Rajaratnam and those connected to his hedge fund firm had been responsible "for dismantling elaborate networks of corrupt executives who gamed the system, exploited their access to proprietary information, shirked their ethical responsibilities and violated the law with impunity."
He said the convictions Monday meant that more than two dozen defendants arrested in the probe had been convicted.
Prosecutors have called the Galleon probe the biggest ever into inside trading in the hedge fund industry. They say the case also marked the first extensive use of wiretaps in an insider trading case.
As in the Rajaratnam trial, the government relied on a vast trove of taped conversations to try to prove Zvi Goffer had engineered a plot to pay two attorneys nearly $100,000 in 2007 and 2008 for the inside tips on mergers and acquisitions that generated millions of dollars in illegal profits. The Securities and Exchange Commission had said Goffer _ who worked for Rajaratnam for nine months before starting his own firm _ was nicknamed "the Octopussy" because of his reputation for reaching for information from multiple sources. His brother and Kimelman worked at Zvi Goffer's firm.
In closing arguments, Assistant U.S. Attorney Richard Tarlowe had urged jurors to follow the trail of taped phone conversations to see how the defendants carried out their crimes and then tried to hide their behavior with prepaid phones and in-person meetings on the street.
"When people are engaged in legal activity, that's not how they act," Tarlowe said. "They all took steps to conceal what they were doing, to cover their tracks."
During the two-week trial, prosecutors introduced evidence that Zvi Goffer gave conspirators the prepaid cellular telephones in an effort to reduce detection by law enforcement.
One-time lawyer Brien Santarlas testified for the government that envy of big Wall Street salaries motivated him to provide inside information about companies he worked for at the corporate firm Ropes & Gray. He said he accepted $25,000 in cash after passing along his first big inside tip.
The defense countered by arguing that the government was trying to win a conviction based on just a few taped conversations among 18,000 phone calls, text messages and emails they recovered.
"It's just not fair what went on here in this courtroom. It was absolutely wrong," said William Barzee, the attorney for Zvi Goffer. "It doesn't matter what the fact is, the government takes it and twists it."
Both Santarlas and the second Ropes & Gray lawyer-turned-tipster, Arthur Cutillo, have pleaded guilty to fraud charges.