Former Galleon Group LLC hedge fund trader Craig Drimal was sentenced to 5 1/2 years in prison after admitting his part in an insider-trading scheme that stretched from technology firms to pharmaceutical companies.
Drimal, 55, pleaded guilty in April to six counts of conspiracy and securities fraud, admitting that he and others at Galleon traded on inside information obtained from lawyers working on transactions involving 3Com Corp. and Axcan Pharma Inc. Drimal said the tips came from Arthur Cutillo and Brien Santarlas, lawyers at Boston-based Ropes & Gray LLP.
“I understand I’ve committed a crime and I deserve to pay the price,” Drimal told U.S. District Judge Richard Sullivan before sentencing.
Prosecutors had asked Sullivan, who handed down the 66-month term yesterday in Manhattan, to sentence Drimal within federal guidelines, which Sullivan said call for a sentence of 57 to 71 months. Drimal asked for a sentence below the guideline range.
In addition to the prison sentence, Sullivan ordered Drimal to forfeit $11 million and to serve three years of supervised release.
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.
Drimal made 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.
Cardillo pleaded guilty in January to securities fraud and conspiracy and agreed to cooperate with the government. He was ordered to pay more than $68,000 as part of an Securities and Exchange Commission lawsuit.
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, the government said. Drimal then contacted former Galleon Group trader Zvi Goffer and told him about the probe, against instructions, prosecutors said.
Drimal also lied to SEC 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.
In a sentencing memorandum filed yesterday, Goffer told a judge he’s a changed man and asked to be sentenced to less than the 10 years in prison called for under U.S. sentencing guidelines. Goffer claimed his two young sons have changed him from the man he was when he committed the crimes.
“The arrogant swagger of 2007 has been replaced with an honest humility in 2011,” according to the court filing. “Yesterday, Zvi Goffer is a truly remorseful and humbled man.”
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.
The case is U.S. v. Goffer, 10-cr-00056, U.S. District Court, Southern District of New York (Manhattan).