Published November 17, 2014
A prosecutor warned jurors in the second trial to result from a massive probe of insider trading at hedge funds not to be deceived by the three defendants' efforts to throw them "off the scent" of crimes that generated millions of dollars in illegal profits.
Assistant U.S. Attorney Richard Tarlowe told the jury in U.S. District Court in Manhattan to follow the trail of the defendants' dozens of taped conversations to learn how stock trader Zvi Goffer executed a scheme to pay nearly $100,000 in bribes to coax inside information about mergers and acquisitions from two lawyers at a Manhattan firm in 2007 and 2008.
The investigation that generated more than 1,000 taped conversations was part of a probe that resulted in more than two dozen arrests and the conviction on insider trading charges two weeks ago of Raj Rajaratnam, the one-time billionaire who founded the Galleon Group of hedge funds. Goffer worked with Rajaratnam for nine months before Goffer started his own investment firm.
Prosecutors say the Galleon probe was 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.
Goffer is on trial with his brother, Emanuel, and a third defendant, Michael Kimelman. All three have pleaded not guilty to charges that they conspired to break securities laws, insisting they based trades only on public information.
Tarlowe told 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 by talking on prepaid phones and taking sensitive conversations to 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 prepaid cellular telephones so they could communicate in a way that reduced their chance of detection by law enforcement.
The prosecutor said jurors should look past "the smokescreens, the cover stories ... to see those tactics for what they are and not be fooled by their attempts to throw you off the scent."
In a defense closing argument, Zvi Goffer's attorney, William Barzee, said prosecutors were 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," he said. "It doesn't matter what the fact is, the government takes it and twists it."
Emanuel Goffer's attorney, Michael Ross, said there was no proof that his client made trades illegally and he warned jurors not to assume he made trades for the same reasons as his brother.
Kimelman's lawyer, Michael Sommer, told jurors they were deciding "an insider trading case where there's no evidence at all of insider trading by Michael Kimelman."
The Securities and Exchange Commission has said Zvi Goffer was nicknamed "the Octopussy" because he had a reputation for having his arms in so many sources of inside information.
During the trial, one-time lawyer Brien Santarlas testified for the government that envy of big Wall Street salaries motivated him to provide inside information about mergers and acquisitions while he worked at corporate firm Ropes & Gray. He said he accepted $25,000 in cash after passing along his first big inside tip.
A second former Ropes & Gray lawyer, Arthur Cutillo, has pleaded guilty to insider trading charges in a deal that calls for him to serve up to three years in prison. He admitted he was paid $32,500 for providing tips to a former college roommate, fellow lawyer Jason Goldfarb.
Goldfarb has pleaded guilty in the case, admitting he accepted money to take tips from Santarlas and Cutillo and relay them to Goffer.
The jury was expected to begin deliberations Thursday after Sommer finishes his closing arguments and the judge reads instructions on the law.
Follow Larry Neumeister at http://twitter.com/Lneumeister