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Ex-Lawyer Cutillo Admits Insider-Trading Scheme

Jan. 14 (Bloomberg) -- Arthur Cutillo, a former Ropes & Gray lawyer charged in the Galleon Group LLC insider-trading case, pleaded guilty to disclosing information on transactions the firm was working on.

Cutillo, 34, pleaded guilty to one count of conspiracy and securities fraud today in federal court in New York, becoming the 15th defendant to plead guilty in what prosecutors say is the biggest investigation of insider trading involving hedge funds. He faces as long as 37 months in prison.

“Your honor, I plead guilty,” he told U.S. District Judge Richard Sullivan. “I plead guilty because I am guilty.”

Cutillo, a 2005 graduate of Villanova University, said he was working as a patent attorney at the firm when he became involved in the insider trading scheme in 2007. Today in court he said for the first time that his former college roommate, Jason Goldfarb, a Brooklyn lawyer who is charged in the case, asked him to obtain material nonpublic information about pending deals the firm was working on. Goldfarb has pleaded not guilty to the charges.

Cutillo admitted today that in 2007, he and former lawyer Brien Santarlas, another lawyer at the Boston-based law firm who has pleaded guilty and is cooperating with authorities, leaked information about transactions involving 3Com and Axcan Pharma Inc., saying that Goldfarb then passed on the tips to Zvi Goffer, a former employee of the Galleon Group LLC hedge fund, who Cutillo said traded on the information.

‘Everlasting Regret’

He said Goldfarb paid him $32,500, which he understood was the result of revenues Goffer earned from the insider trading. Goffer is scheduled to go on trial in May.

Santarlas pleaded guilty in December 2009 to his role in the scheme and is cooperating with authorities.

“To my everlasting regret and shame I agreed to provide Jason Goldfarb with information,” Cutillo said. “I am truly ashamed by my actions. I have let myself down as well as my family, my friends and colleagues.”

Prosecutors claim the insider-trading ring was led by Goffer, founder of Incremental Capital LLC. Goffer has pleaded not guilty. Prosecutors previously said that within the ring Goffer was called “the Octopussy,” a reference to the 1983 James Bond film starring Roger Moore, because he had many sources of information.

Cynthia Monaco, a lawyer for Goffer, and Jeffrey Hoffman, a lawyer for Goldfarb, didn’t immediately return voicemail messages left at their offices after business hours seeking comment.

‘A Relief’

“He is a young man with four young children,” said his lawyer, Catherine Redlich, after court. “From the very beginning and the day of his arrest he has been contemplating and waiting to take responsibility for this,” she said. “Today is a day that is a relief for him and his family.”

The lawyer was arrested in 2009 and charged with securities fraud, for passing along tips, including secret information that Bain Capital LLC planned to buy 3Com Corp. for 44 percent more than its market value.

Prosecutors said he traded on the information and passed it along to others charged in the scheme, in exchange for kickbacks. He leaked information about at least four planned deals in 2007, according to the Federal Bureau of Investigation.

The case is U.S. v. Goffer, 10-cr-56, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net; Bob Van Voris in New York at rvanvoris@bloomberg.net.

To contact the editor responsible for this story: David E. RovellaS LEGA at drovella@bloomberg.net.

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