Michael Cardillo, the former Galleon Group LLC portfolio manager who pleaded guilty to insider trading, provided “extraordinary” help in cases against former Goldman Sachs Group Inc. (GS) director Rajat Gupta and former Galleon trader Zvi Goffer, U.S. prosecutors said.
Cardillo, who testified at Gupta’s and Goffer’s criminal trials, was the first person to describe how the former Goldman Sachs and Procter & Gamble Co. (PG) director supplied inside information to Galleon co-founder Raj Rajaratnam, Assistant U.S. Attorney Reed Brodsky said in a memo to the court.
The information Cardillo provided was “extraordinarily significant” and helped advance the government’s investigation of Gupta, Brodsky said. Cardillo testified at the trial of Gupta, who was found guilty in June of three counts of securities fraud and one count of conspiracy.
“Cardillo was the first person to bring to the government’s attention illegal tips Raj Rajaratnam had received from an inside source at P&G,” Brodsky said in his memo to U.S. District Judge Jed Rakoff in Manhattan. “It came at a time when the government’s investigation into Gupta’s criminal involvement had not advanced significantly.”
Cardillo started working at Galleon in 2007 managing a portfolio for stocks focusing on the consumer sector, working for Rajaratnam’s brother, R.K., who was also a Galleon fund manager. He testified at Gupta’s trial that he traded on P&G stock in 2009 after learning from R.K. Rajaratnam that Raj Rajaratnam had a “guy” on the consumer-product’s company board.
“He told me he was hearing from Raj’s guy on the P&G board,” Cardillo told jurors during his testimony in May.
R.K. Rajaratnam hasn’t been accused by the government of wrongdoing.
Even though the jury didn’t convict Gupta of the P&G counts, Cardillo’s assistance was significant, Brodsky said.
Cardillo pleaded guilty to one count of securities fraud and one count of conspiracy in January 2011. He faces as long as 25 years in prison when he is sentenced by Rakoff on Oct. 25. Gupta is scheduled to be sentenced by Rakoff the day before.
While prosecutors didn’t specify a term for Cardillo, Brodsky told the court that he provided information about more than 15 different subjects of Raj Rajaratnam’s insider trading schemes.
Prosecutors said he was the first Galleon employee to plead guilty and agree to cooperate with the government in its investigation of insider trading at Galleon and a second hedge fund started by Goffer. Cardillo also testified at Goffer’s trial last year.
The information he provided to prosecutors led to guilty pleas by Arthur Cutillo, Jason Goldfarb and David Plate, prosecutors said.
Cutillo, a former Ropes & Gray LLP lawyer, admitted passing information on transactions the firm was working on and is serving a 2 1/2-year prison term. Goldfarb, a Brooklyn, New York, lawyer who admitted passing tips he got from Cutillo, is serving a term of three years in prison. Plate, a former trader at Schottenfeld Group LLC who testified against Goffer, was sentenced to three years’ probation and six months of house arrest.
Goffer was convicted last year at trial and sentenced to 10 years in prison. Rajaratnam was tried separately and is serving an 11-year prison term after being convicted of 14 counts of conspiracy and securities fraud last year.
“Mike Cardillo fully accepts responsibility for his conduct and looks forward to the next chapter in his life with his wife and young children,” said Marjorie Peerce, Cardillo’s lawyer. She said her sentencing memorandum to the court wouldn’t be filed publicly.
At least five others tied to the Galleon case who pleaded guilty and agreed to cooperate with the U.S. have been sentenced to probation and spared prison.
Two cooperating witnesses who testified against Rajaratnam were recently spared prison terms for their assistance to the government. Rajiv Goel, Rajaratnam’s friend and Wharton classmate, was sentenced last month to two years’ probation by U.S. District Judge Barbara Jones. Anil Kumar, a former McKinsey & Co. partner who was also a Wharton classmate and friend of Rajaratnam, was sentenced in July to two years’ probation by U.S. Circuit Judge Denny Chin.
The case is U.S. v. Cardillo, 11-cr-907, U.S. District Court, Southern District of New York ( Manhattan).
To contact the reporter on this story: Patricia Hurtado in New York at firstname.lastname@example.org