Bloomberg News

Rajaratnam Awaits Reckoning as Another Underling Heads to Prison

October 08, 2011

Oct. 8 (Bloomberg) -- Emanuel Goffer was sentenced to three years in prison for his role in the largest hedge-fund insider trading ring in U.S. history, less than a week before Galleon Group LLC co-founder Raj Rajaratnam, mastermind of the central scheme, is to learn his fate in the same courthouse.

Goffer, 32, who was sentenced by U.S. District Judge Richard Sullivan at a hearing in Manhattan yesterday, received a fraction of the maximum 24 1/2 years prosecutors are seeking for Rajaratnam at his Oct. 13 sentencing.

Prosecutors said Goffer and his brother bribed two lawyers at Boston-based Ropes & Gray LLP to give them secret information about transactions involving 3Com Corp., Axcan Pharma Inc., Kronos Inc. and Hilton Hotels Corp.

“This was a deliberate scheme to procure inside information, privileged information, from a law firm by bribing lawyers to corrupt them,” Sullivan told Goffer before passing sentence. Sullivan also sentenced Goffer to three years of supervised release after the prison term and ordered him to forfeit $761,000 made from the scheme.

Last month, Goffer’s brother, former Galleon trader Zvi Goffer, was given a 10-year sentence for insider-trading crimes. The two Goffers were convicted, along with former trader Michael Kimelman, in June. Sullivan said yesterday that Emanuel Goffer deserved less prison time than his brother, “the most culpable person” in that ring.

Incremental Capital

Emanuel Goffer, who co-founded Incremental Capital LLC in New York with his brother and Kimelman, was responsible for creating instant messages and transactions intended to provide cover for illegal trades, the U.S. said. He used an untraceable prepaid mobile phone to pass tips to his brother and helped pay bribes to the two lawyers, prosecutors said.

Goffer and Kimelman were both convicted of one count of conspiracy and two counts of securities fraud. Kimelman’s sentencing is scheduled for Oct. 12.

Rajaratnam, 54, was convicted by a jury in May of 14 counts of securities fraud and conspiracy. He was accused of using illegal tips to trade in stocks of companies including Goldman Sachs Group Inc., Intel Corp., Google Inc., ATI Technologies Inc. and Clearwire Corp. Prosecutors said he made $72 million from his crimes.

At yesterday’s hearing, Michael Ross, Goffer’s lawyer, asked for a “tempered sentence” shorter than the guideline range, which Sullivan put at 41 to 51 months. In court papers, Goffer asked for leniency, saying he plays a critical role in raising a 3-year-old son with developmental problems.

At the defendant’s request, Sullivan said he would recommend sending Goffer to the federal prison in Otisville, New York, along with his brother. The judge gave Goffer 60 days to report to prison.

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

--With assistance from Patricia Hurtado in Manhattan federal court. Editors: Andrew Dunn, Mary Romano

To contact the reporter on this story: Bob Van Voris in Manhattan federal court at rvanvoris@bloomberg.net.

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


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