Jason Goldfarb, a New York attorney who passed inside information about mergers and acquisitions to ex-Galleon Group LLC trader Zvi Goffer, was sentenced to three years in prison.
Goldfarb, 33, today apologized to the court for his crimes and said he hadn’t pocketed the $32,500 he was paid for the tips. Goldfarb, his lawyer and parents said the money went toward his mother’s medical care after she was diagnosed with cancer. His attorney, Michael Soshnick, asked that his client be sentenced to community service rather than time in prison.
“I stand before you a broken man,” Goldfarb said in federal court in Manhattan. “I make no excuses for my conduct. Nobody can or will punish me more than I can punish myself. I’d like to speak at law schools and colleges to discuss the mistakes that I have made,” he said.
U.S. District Judge Richard Sullivan told Goldfarb that he was imposing a prison term because the defendant was a lawyer who broke the law and because insider trading was a serious crime that, for the sake of deterrence, must be punished.
“He was a very significant and active participant in the criminal conduct,” Sullivan said. “His role was more than a go-between described by Mr. Soshnick. And, he actually facilitated the misconduct of other lawyers as well.”
Goldfarb pleaded guilty to passing information from two attorneys at Boston-based Ropes & Gray LLP regarding transactions their firm was working on. One was his former college roommate, Arthur Cutillo. The other was Brien Santarlas.
Prosecutors from the office of U.S. Attorney Preet Bharara said a term of 46 months was warranted, citing the fact that Goldfarb recruited the attorneys into the scheme. U.S. sentencing guidelines called for a term of 37 to 46 months for Goldfarb, court records show.
“The picture that has been painted was of Mr. Goldfarb who engaged in this conduct only out of necessity and desperate circumstances,” Assistant U.S. Attorney Richard Tarlowe said. “But it is very different from the picture that emerges from the wiretaps and telephone calls.”
In an unusual move for a sentencing proceeding, Sullivan asked Tarlowe to play an excerpt from a February 2008 wiretap used at Goffer’s trial in which Goldfarb boasts that he would “press” and “drill” Cutillo and Santarlas for tips about deals the law firm was working on.
“We’re talking millions,” Goldfarb said. “Every one of us should be set for life within a year or two if things are played right.”
Sullivan noted the scheme went on for more than a year and that Goldfarb on another wiretap spoke of the potential gains they’d see from Goffer getting a job at Galleon because of the fund’s volume of trading.
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.
During his guilty plea, Cutillo admitted that he and Santarlas leaked information about transactions involving 3Com Inc. and Axcan Pharma Inc.
The case is U.S. v. Goffer, 10-cr-00056, U.S. District Court, Southern District of New York (Manhattan).