Bloomberg News

Goffer Insider Trading Proof Is ‘Overwhelming,’ Prosecutor Says

June 02, 2011

June 2 (Bloomberg) -- “Devastating” wiretapped telephone calls in which ex-Galleon Group LLC trader Zvi Goffer is heard sharing illegal tips make for “overwhelming” evidence against him, a prosecutor said at the close of the insider-trading case.

Assistant U.S. Attorney Richard Tarlowe yesterday urged jurors in Manhattan federal court to convict Goffer, his brother Emanuel and accused accomplice Michael Kimelman. Deliberations may begin today after the conclusion of closing arguments by defense attorneys and a prosecutor’s rebuttal.

“You heard the defendant’s own voice,” Tarlowe said, citing captured calls at the heart of the government’s case. There are “plenty of devastating calls,” he said.

The three defendants, who co-founded Incremental Capital LLC after Zvi Goffer was fired from Galleon, are accused of trading on illegal tips that came from attorneys then working at the law firm Ropes & Gray LLP. The tips were about transactions involving 3Com Corp. and other stocks, according to prosecutors.

A defense lawyer for Zvi Goffer, William Barzee, told the jury in his closing that the government twisted “innocent facts” to support its case.

Goffer’s ex-boss, Raj Rajaratnam, was found guilty May 11 of insider trading. He faces as long as 19 1/2 years in prison when he’s sentenced on July 29.

Wiretap Evidence

Tarlowe told jurors that Goffer passed inside information to another Galleon trader, Craig Drimal, to impress Rajaratnam and win a job at Galleon.

The prosecutor took jurors through wiretaps that he said provided overwhelming evidence of guilt. In one from Jan. 2, 2008, Zvi Goffer is heard calling himself “responsible for a honeymoon and a kitchen” in a conversation with Jason Goldfarb, a Brooklyn, New York, lawyer who passed tips from two Ropes & Gray attorneys.

Goffer was referring to $25,000 that he paid in bribes to the two Ropes and Gray lawyers, which they used to pay for a honeymoon and renovated kitchen, Tarlowe said, citing testimony from one of the attorneys, Brien Santarlas.

Goldfarb, Drimal and Santarlas pleaded guilty in the case, as did the other Ropes & Gray lawyer, Arthur Cutillo.

Prosecutors lack intercepted conversations of Emanuel Goffer and Kimelman openly discussing inside tips.

Guilty Knowledge

They introduced recordings of Zvi Goffer referring in their presence to secret sources of leaks and to phony research that might be used to fool regulators about why trades were made, Tarlowe said. That showed that Emanuel Goffer and Kimelman knew their trades were illegal, the prosecutor said.

“Why do you conceal what you’re doing?” Tarlowe asked. “Because you know what you’re doing is wrong.”

Tarlowe urged the jury to consider why the three men used prepaid phones that they subsequently destroyed, why Zvi Goffer spoke on recordings about creating what he called a “divergence” that would conceal the reason for trades, why Zvi Goffer referred on recordings to “our guy,” and why he and Kimelman spoke often about the legal documents that prosecutors say were used in deals that Ropes & Gray worked on.

“Think about why they were doing things like that,” he said.

Twisting Words

Barzee, Zvi Goffer’s lawyer, accused the government of twisting comments his client made on a few of the thousands of recordings, texts and e-mails that prosecutors reviewed, and then coming up with a “tortured” explanation of how they prove Zvi Goffer’s guilt.

In one conversation, prosecutors claim that a comment Zvi Goffer makes about whether news is “public” is proof that he was looking for inside information, Barzee said.

“They take absolutely innocent facts,” Barzee said. “And they twist it to fit their story.”

Another attorney for Zvi Goffer, David Pettus, said his client was bluffing when he claimed to have inside tips.

“He wanted David Slaine’s money,” Pettus said. Slaine, a successful trader, taped conversations with Zvi Goffer after agreeing to plead guilty and cooperate with prosecutors probing insider trading. “He said some really stupid things.”

Michael Ross, the lawyer for Emanuel Goffer, told jurors that his client used disposable phones so his trading strategies wouldn’t be stolen by others on Wall Street, an argument that Tarlowe earlier said was “absurd.”

Aided Prosecutors

Ross also reminded jurors that trader Franz Tudor worked with Emanuel Goffer for a year while secretly aiding prosecutors and didn’t turn up evidence that incriminated him.

The Goffer and Rajaratnam cases are part of a U.S. crackdown on insider trading. In the same courthouse, Winifred Jiau, a former consultant with so-called expert networking firm Primary Global Research LLC, went on trial yesterday for helping company employees leak stock tips to hedge funds.

The case is U.S. v. Goffer, 10-cr-00056, U.S. District Court, Southern District of New York (Manhattan).

--Editors: Stephen Farr, Charles Carter

To contact the reporter on this story: David Glovin in New York at dglovin@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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