Craig Drimal, the former Galleon Group LLC trader who pleaded guilty to insider-trading charges, should get a prison term of 70 to 80 months, which is within federal sentencing guidelines, the U.S. said in a court filing.
Drimal, 55, pleaded guilty in April in federal court in New York charges of conspiracy and securities fraud. Drimal admitted that he and others at Galleon traded on inside information obtained from lawyers working on transactions involving 3Com Corp. and Axcan Pharma Inc. in 2007. Drimal said the information was obtained from Arthur Cutillo and Brien Santarlas, lawyers at Boston-based Ropes & Gray LLP.
Drimal has suggested that the court impose community service or home confinement in lieu of a “substantial” prison term, prosecutors said. The request should be denied in order to send a “strong message of deterrence to others in the hedge fund community” and because the “nature and extent of his criminal conduct doesn’t warrant community service,” prosecutors said.
“Drimal has no excuse for his illegal conduct,” prosecutors said in the sentencing memo, which was filed yesterday. “He grew up in a stable, loving family with no financial difficulties. He is a college graduate. He has a loving and supportive family. He fully understood that insider trading was illegal and yet repeatedly disregarded the law to make a lot of money.”
Aug. 31 Sentencing
Drimal is scheduled to be sentenced by U.S. District Judge Richard Sullivan on Aug. 31. Drimal’s attorney, Jane Anne Murray, said she filed a memorandum last week asking the judge impose a sentence below the federal guidelines.
“We’re not surprised by their position; it’s been consistent,” Murray said in a phone interview. “We disagree with the government on a number of issues including the applicable guidelines. And we’re seeking a sentence that is substantially lower than the one the government is seeking.”
Prosecutors also asked the court to obtain a judgment against Drimal to recover the amount of the proceeds of his crimes, which they said are at least $7 million.
Drimal made gross personal profits of about $6.47 million from trades in 3Com and Axcan based on the information from the Ropes & Gray lawyers, and provided material nonpublic information to Galleon trader Michael Cardillo, who used the tips to earn profits of about $731,505, prosecutors said in the memo.
Cardillo pleaded guilty in January to securities fraud and conspiracy and agreed to cooperate with the government. Cardillo was ordered to pay more than $68,000 last month as part of an SEC suit.
Drimal also earned about $4.3 million from trades based on tips about the pending acquisition of Hilton Hotels Corp. in 2007, and about $950,117 from trades made on information about a takeover of Kronos Inc., prosecutors said.
Drimal met with government representatives after Federal Bureau of Investigation agents approached him before his arrest in November 2009 and sought his cooperation, prosecutors said in the memo. Drimal then contacted former Galleon Group trader Zvi Goffer and told him about the probe, contrary to instructions Drimal was given, prosecutors said.
Drimal also lied to the U.S. Securities and Exchange Commission personnel in July 2008 when they interviewed him about the reason why he bought Axcan stock, prosecutors said.
Goffer was convicted of all 14 counts against him in June, in the second trial of defendants charged in a nationwide investigation of insider trading at hedge funds. Goffer’s former boss, Galleon Group co-founder Raj Rajaratnam, was convicted of insider trading in May. Prosecutors are seeking a sentence of more than 24 years when Rajaratnam is sentenced Sept. 27.
Cutillo, who pleaded guilty in January, was sentenced to 30 months in prison in June. Santarlas, who pleaded guilty and testified at the Goffer trial, hasn’t been sentenced.
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