From left, Norbert Von Der Groeben/Reuters; Lucas Jackson/Reuters; Frank Franklin II/Associated PressFrom left, James Fleishman of Primary Global Research, Zvi Goffer, a former hedge fund trader at the Galleon Group, and Craig Drimal, a former hedge fund trader and cohort of Mr. Goffer.
The last week of the summer is supposed to be a slow time on Wall Street. Not so on the white-collar crime beat.
Wednesday was busy at the Federal District Court in Manhattan, the epicenter of the government’s crackdown on insider trading at hedge funds. Here’s a roundup:
James Fleishman
The trial of James Fleishman, a former salesman at Primary Global Research, started in Judge Jed S. Rakoff’s courtroom. Federal prosecutors have charged Mr. Fleishman, 42, with knowingly orchestrating the passing of illegal stock tips from employees at publicly traded companies to hedge fund traders.
“If you know tomorrow’s news today, you can make money, big money,” said the federal prosecutor, Antonia M. Apps, in her opening, according to Reuters. (If the line sounds familiar, that’s because it was also used by her colleagues who tried Raj Rajaratnam, the convicted hedge fund billionaire who ran Galleon Group.)
As expected, Mr. Fleishman’s lawyer argued that his client did not know that he was arranging calls and meetings during which corporate secrets were discussed and later traded upon.
“Mr. Fleishman did his job honestly and honorably,” said his lawyer, Jay Nelson, according to the Reuters report. “Mr. Fleishman believed that these consultations were proper and appropriate, and that they were what made P.G.R. a good business.”
Zvi Goffer
A lawyer for Zvi Goffer, a former hedge fund trader at the Galleon Group, filed a brief asking a judge for leniency at his sentencing, which is set for October. In June, a jury convicted Mr. Goffer of trading on illegal stock tips about corporate mergers.
The nonbinding federal sentencing guidelines call for a sentence of 10 to 12 and a half years. His lawyer, William Barzee, said a sentence of about six years would be more appropriate.
“The arrogant swagger of 2007 has been replaced with an honest humility in 2011,” Mr. Barzee said of his client.
As part of the filing, Mr. Goffer, 34, included a letter from himself. He promised that he would not appeal his conviction, settle a civil case brought against him by the Securities and Exchange Commission and agree to a permanent ban from the securities industry. He also said he would repay his illegal trading profits.
“I stand before the court today a humbled man who in many respects is not the same brash, reckless, irresponsible man who committed these crimes,” he wrote in the letter. “I will use this opportunity to become a better son, a better husband and a better father.”
Mr. Goffer, who said he experienced “shame, self-loathing and depression” after his arrest, is married with two young sons. He discussed his career as a hedge fund trader:
When I got into the business of trading stocks I was in my late twenties. I was a reckless and immature young man who thought the rules did not apply to me. My heroes were people like David Slaine, Craig Drimal and Raj Rajaratnam. Men who made millions of dollars in a “day’s work.” I wanted to be just like them, and an erroneous lesson I learned early on was that in order to get ahead on Wall Street you had to be willing to “get an edge.” And the truth is, I was all too eager to get that edge. I was willing to go to great lengths, even grossly illegal lengths, to get an edge. Pride and greed were my constant companions. I was lost.
Craig Drimal
A federal judge sentenced Craig Drimal, a former hedge fund trader and cohort of Mr. Goffer, to five and a half years in prison. Mr. Drimal, 55, pleaded guilty in April to trading on illegal stock tips from corporate lawyers while working in Galleon’s offices. The prison term meted out by Judge Richard Sullivan was squarely in the middle of the range suggested by the sentencing guidelines.
“I understand I’ve committed a crime and I deserve to pay the price,” Mr. Drimal said before the sentencing, according to a Bloomberg News report. In addition to the sentence, Judge Sullivan ordered Mr. Drimal to forfeit $11 million in illegal trading profit. The majority of his tips came from two former corporate lawyers at Ropes Gray who have both pleaded guilty.
Anthony Scolaro
The S.E.C. settled a civil insider trading lawsuit against Anthony Scolaro, a former trader at Diamondback Capital Management. In November, Mr. Scolaro pleaded guilty in a related criminal case.
On Wednesday, Mr. Scolaro agreed to forfeit about $140,000 in illegal profit and pay a $63,000 penalty to resolve his role in the case. He also accepted a permanent ban from the securities industry. The S.E.C. said he traded on an illegal tip about a takeover of Axcan Pharma in 2007 that came from the aforementioned former Ropes Gray lawyers.
As part of the settlement, Diamondback agreed to disgorge about $1 million in principal and interest, according to the S.E.C., an amount representing the firm’s profit from Mr. Scolaro’s illegal trading. Diamondback, whose offices were raided late last year by agents from the Federal Bureau of Investigation, has not been accused of any wrongdoing. The hedge fund told investors on Wednesday that the firm, and not its investors, would pay for the settlement.
Article source: http://feeds.nytimes.com/click.phdo?i=1a2a67b3e31989549a8eaad54b3d7baa
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