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A stock trader dubbed the Octopussy because he reached for so much inside information was sentenced Wednesday to 10 years in prison by a judge who said a harsh punishment was necessary because insider trading is so difficult to detect.
Zvi Goffer was convicted with two others in June in a conspiracy to pay bribes to coax confidential information out of two shady lawyers at a Manhattan firm.
"Insider trading is very, very hard to detect," U.S. District Judge Richard Sullivan said as he also ordered Goffer to pay more than $10 million in restitution. "Because of that, it has to be dealt with harshly."
He added: "These crimes are not going to be tolerated, certainly not in my courtroom."
The 34-year-old Goffer told the judge in a pre-sentencing letter that he now realizes he had warped perceptions of "survival of the fittest." He said "everyone is doing it" is not a good excuse for doing wrong. Goffer was among more than two dozen people convicted in what prosecutors called the biggest hedge fund insider trading case in history.
Given a chance to speak, Goffer apologized first to investors in the stocks in which he had an unfair advantage, saying: "They didn't have the information I had."
He began crying when he apologized to his brother, Emanuel, who was convicted at trial along with him and is awaiting sentencing. A third defendant, Michael Kimelman, also awaits sentencing.
"He knows I love him," he said of his brother. Zvi Goffer said he didn't always understand the seriousness of the crime but had awakened to its tragic consequences.
"Now today I have to face it and I am terrified," he said.
The sentence, one of the longest ever given to someone convicted of insider trading, caused Goffer's wife to break down in sobs.
"What am I going to do?" she called out in court at one point. "It's not fair!" A woman beside her then shouted a profanity, causing Sullivan to rise from the bench and threaten to bring in U.S. marshals to make arrests.
"This is a courtroom, not a street corner," he said.
Goffer was convicted by a jury that viewed evidence that he had arranged to pay two attorneys nearly $100,000 in 2007 and 2008 for inside tips on mergers and acquisitions.
During the two-week trial, prosecutors introduced evidence that Goffer gave conspirators prepaid cellular telephones in an effort to reduce detection by law enforcement.
The judge said the message of the prosecution to Wall Street has to be more than a warning that prepaid telephones are not the best way to dodge prosecution. He said Goffer had repeatedly demonstrated that he knew he was breaking the law and didn't care.
"It's a game that you and others seem to find exciting," he said.
Before starting his own firm, Goffer worked for nine months for Raj Rajaratnam, a one-time billionaire who was convicted earlier this year of charges at his own insider trading trial and faces sentencing next week.
Rajaratnam and Goffer were among more than two dozen people convicted in a case that utilized an unprecedented number of wiretaps for a white-collar case. U.S. Attorney Preet Bharara has said the government was responding to the increased use of techniques more commonly used by drug dealers and mobsters to cover up their crimes.
Investigators eventually expanded the insider trading probe to target employees of so-called research networking firms that connect hedge fund managers with employees of public companies. Authorities said they brought charges after discovering that some of the relationships enabled inside information rather than legitimate research to be discussed.
Winifred Jiau, of Fremont, Calif., was among 13 people arrested last year on charges that she conspired to accept cash and gifts to feed inside information to hedge funds. Most of the other defendants have pleaded guilty. Jiau was scheduled to be sentenced later Wednesday.
Jiau, a U.S. citizen born in Taiwan who has remained imprisoned since her arrest, worked for two years as a consultant for Primary Global Research, a Mountain View, Calif.-based company.
Prosecutors said she earned more than $200,000 by selling "tomorrow's news today" about earnings and performance of publicly traded companies. The information, they say, was communicated in code with her co-defendants, sometimes using "cooks" to refer to tipsters, "recipe" for the inside information and "sugar" for what she was paid for it.