An ex-Galleon Group LLC trader and expert-networking consultant were sentenced today to 10 years and four years in prison for their roles in a nationwide insider trading scandal, just three weeks before Raj Rajaratnam, the man at the center of the investigation, is to learn his fate.
Zvi Goffer, the trader, and Winifred Jiau, who worked for Primary Global Research LLC, were convicted in June in separate Manhattan federal court trials. Jiau was sentenced today to four years after the government asked for as long as 10 years. Goffer received a 10-year term following a U.S. request that he serve almost 13 years.
Rajaratnam, 54, co-founder of Galleon, was found guilty in May of directing the largest hedge-fund insider-trading ring. He should be given a prison term of as long as 24 1/2 years when sentenced, prosecutors said. His sentence was postponed today from Sept. 27 to Oct. 13.
The sentences for Goffer and Jiau are more severe than in typical insider-trading cases where a defendant gets and trades on information only once, said John C. Coffee Jr., a professor at Columbia Law School in New York.
“These were professionals engaging in this as their regular course of business,” Coffee said. “They went about it systematically.”
Dozens of People
Dozens of people have been charged with participating in overlapping insider-trading rings by the office of U.S. Attorney Preet Bharara in Manhattan. The Goffer and Rajaratnam trials featured phone conversations secretly recorded by the Federal Bureau of Investigation. The two, along with Jiau, were convicted based partly on the testimony of co-conspirators cooperating with prosecutors.
Jurors at Jiau’s trial saw instant electronic messages that a hedge fund analyst sent his boss while they were on the phone with her. The analyst also recorded the calls.
Goffer, who co-founded Incremental Capital LLC after he was fired from Galleon in 2008, was convicted of all 14 criminal counts against him. Goffer’s brother, Emanuel, and Michael Kimelman were convicted at the same trial. Prosecutors said Zvi Goffer headed a ring that made more than $10 million trading in 3Com Corp., Axcan Pharma Inc., Kronos Inc. and Hilton Hotels Corp. based on information misappropriated by two lawyers.
Prosecutors had asked U.S. District Judge Richard Sullivan to send Goffer to prison for as long as 12 years and seven months.
“Goffer’s criminal scheme was brazen, sophisticated and extensive,” prosecutors argued in a Sept. 14 memorandum.
Goffer, 34, claimed he’s a changed man who deserves a lesser sentence.
Jiau, 43, of Fremont, California, was convicted of one count each of conspiracy and securities fraud. A jury found her guilty of passing earnings and other information about Nvidia Corp. and Marvell Technology Group Ltd. to Noah Freeman, a former SAC Capital Advisors LP portfolio manager, and Samir Barai, founder of New York-based Barai Capital Management LP.
Prosecutors argued Jiau should get eight to 10 years in prison in papers filed with U.S. District Judge Jed Rakoff. Jiau’s lawyers downplayed her role in the chain of inside-traders and called the government’s suggested sentence “draconian.”
‘Couldn’t Shoot Straight’
“If Ms. Jiau was at the ‘heart’ of anything in this case, it was of the gang that couldn’t shoot straight,” they said.
Yesterday, James Fleishman, a former executive at Mountain View, California-based Primary Global, was convicted of two counts of conspiracy for his role in a separate insider-trading scheme in which he passed tips to fund managers. His sentencing is scheduled for Dec. 21.
Craig Drimal, another former Galleon trader, was sentenced to 5 1/2 years in prison, which had been the longest sentence in the scandal before Goffer’s term was handed down today. Danielle Chiesi, a former analyst at New Castle Funds, got 2 1/2 years for passing tips to Rajaratnam and others. Drimal and Chiesi both pleaded guilty.
An analysis by Bloomberg News earlier this year showed that 19 of the 43 defendants sentenced in federal court in Manhattan for insider trading since 2003 got no jail time. The average prison sentence was 18.4 months.
Don Chu, the Taiwan liaison for Primary Global, got two years of probation.
The cases are U.S. v. Goffer, 10-cr-00056, and U.S. v. Jiau, 11-cr-00161, U.S. District Court, Southern District of New York (Manhattan).