(Updates with judge’s statement in third paragraph, Cutillo’s in fifth.)
June 30 (Bloomberg) -- Arthur Cutillo, a former Ropes & Gray LLP lawyer who pleaded guilty in the Galleon Group LLC insider-trading case, was sentenced to 2 1/2 years in prison.
U.S. District Judge Richard Sullivan in New York imposed the sentence today and ordered Cutillo to forfeit $378,068 along with two other defendants. He must surrender to prison authorities by Sept. 16, the judge ruled.
“You were one of the winners in life,” Sullivan said. “At the time of the crime, you were a respected attorney. You were earning more than $200,000. Yet it wasn’t enough.”
Cutillo pleaded in January to one count of conspiracy and securities fraud. He admitted disclosing information on transactions the firm was working on to another co-defendant, Jason Goldfarb, in exchange for kickbacks.
“I just want to apologize to everybody I hurt,” Cutillo, 34, of Newark, New Jersey, said today in court. “I know what I did was terribly wrong. Not only did I betray my law firm, I betrayed everyone I believed in. I’m sorry.”
Prosecutors said information from Cutillo was passed on to former Galleon trader Zvi Goffer, allowing Goffer and others to earn more than $7 million.
The sentence was at the low end of a range of 2 1/2 years to three years and one month recommended by the government. Assistant U.S. Attorney Andrew Fish said in court papers that the lawyer went “sneaking around” his firm searching for documents on coming mergers and acquisitions that provided tips.
Sullivan said the sentence was appropriate considering Cutillo’s family and good deeds.
Catherine L. Redlich, Cutillo’s lawyer, asked Sullivan to impose no prison time, citing the welfare of her client’s four young children.
Cutillo, a 2005 law graduate of Villanova University, is one of 27 people charged in what prosecutors say is the biggest investigation of insider trading. The government said crimes were committed by overlapping rings involving Galleon Group co- founder Raj Rajaratnam, who was convicted in May.
According to evidence presented at trial, one ring was led by Goffer, founder of Incremental Capital LLC and a former Galleon trader. He was convicted June 13 with his brother Emanuel Goffer and a third man. Goldfarb, Cutillo’s former college roommate, pleaded guilty April 21.
Cutillo’s co-defendant Brien Santarlas, another ex-Ropes & Gray lawyer, testified in another trial that he and Cutillo searched desks and computers and eavesdropped for secrets to sell.
“Cutillo’s crimes were extensive,” Fish said in court papers. “He used multiple methods to avoid detection, such as sneaking around Ropes & Gray and its computer system to find material nonpublic information that would be useful for a trader and using prepaid cellular telephones to communicate with his partners in crime.”
Cutillo said when pleading guilty that he was a patent attorney when he became involved in the insider-trading scheme. In 2007, he and Santarlas leaked information about transactions involving 3Com and Axcan Pharma Inc., he said. Santarlas pleaded guilty and is awaiting sentencing.
Goldfarb passed on the tips to Goffer, who traded on the information, Cutillo said.
“This is a crime that also has real negative consequences over a broad spectrum,” the judge said today. “It certainly has a negative impact on the national market and people’s confidence in the markets. If you believe elites in this game played with loaded dice, they think the game is rigged.”
Cutillo’s attorneys noted that he agreed to plead guilty and accept responsibility for his crimes. His brother’s death followed by his wife’s miscarriage “are factors that help to provide context for his misconduct,” the defense said in court papers.
The case is U.S. v. Goffer, 10-cr-56, U.S. District Court, Southern District of New York (Manhattan).
--Editors: Charles Carter, Michael Hytha
To contact the reporter on this story: Patricia Hurtado in New York at firstname.lastname@example.org.
To contact the editor responsible for this story: Michael Hytha at email@example.com