Brien Santarlas, a former lawyer at Ropes & Gray LLP, was sentenced to six months in prison for passing information on pending mergers to stock traders.
Santarlas, 34, pleaded guilty to insider trading charges in December 2009 and cooperated with the U.S. investigation of illegal tips to hedge funds.
Calling that cooperation “very, very important,” U.S. District Judge Richard Sullivan in Manhattan today said that as a lawyer, Santarlas should be held to a high standard and his sentence should send a message to other attorneys.
“It’s important that those legal professionals understand they breach those duties at their peril,” Sullivan said before he handed down Santarlas’s sentence. “You don’t get a pass.”
Santarlas and Arthur Cutillo, a fellow attorney at Ropes & Gray, passed tips about two pending mergers that the firm was working on to Cutillo’s college roommate, Jason Goldfarb, who passed along the information to Zvi Goffer, a former trader at Galleon Group LLC. The deals were Bain Capital Partners’ acquisition of 3Com Corp. and TPG Capital’s purchase of Axcan Pharma Inc.
Santarlas pleaded guilty to securities fraud and agreed to forfeit $32,500.
‘Violated My Oath’
“I’ll never forgive myself,” Santarlas told the judge today. “I violated my oath as an attorney.”
“Please know this is not how I was raised,” said Santarlas, whose parents, wife, in-laws and friends attended the 90-minute hearing.
Sullivan replied, “This doesn’t define you. It was a tremendous error.”
Assistant U.S. Attorney Andrew Fish told the judge that Santarlas agreed to cooperate with the authorities as soon as they approached him and to record a conversation with Cutillo. Santarlas testified at the trial of Goffer, who was convicted of 14 counts in June and sentenced to 10 years in prison.
“It really was critical to the way this case played out,” Fish said of Santarlas’s cooperation.
Robert Stahl, Santarlas’s lawyer, had asked the judge to sentence him to home confinement. Sullivan replied that he would be “rewarded” for his cooperation.
Cutillo received a 30-month sentence in June. Goldfarb pleaded guilty and was sentenced in August to three years in prison.
Goffer worked for Raj Rajaratnam, the founder of the Galleon hedge fund, who was sentenced to 11 years in prison, the longest prison term for insider trading. He was sentenced to 10 years in September.
Another former Galleon trader, Craig Drimal, pleaded guilty in April 2010 to trading on secret inside information from Santarlas and Cutillo and was sentenced to 5 1/2 years in prison.
The case is U.S. v. Goffer, 10-cr-00056, U.S. District Court, Southern District of New York (Manhattan).