2 NY insider trading cases pack stern punishment
Thursday, September 22, 2011
NEW YORK (AP) — A stock trader dubbed the Octopussy because he reached for so much inside information was sentenced Wednesday to 10 years in prison and a California finance researcher convicted in a separate but related insider trading case received a four-year prison term as two judges tried to send a stern warning to Wall Street.
“Insider trading is very, very hard to detect. Because of that, it has to be dealt with harshly,” U.S. District Judge Richard Sullivan said as he gave 34-year-old Zvi Goffer one of the longest prison terms ever handed down in an insider trading case. He added: “These crimes are not going to be tolerated, certainly not in my courtroom.”
U.S. District Judge Jed Rakoff said it was important that each sentence send a tougher message to deter inside trading than previously thought necessary.
“It’s hard to detect but easy to commit so the temptations are great,” Rakoff said as he sentenced Winifred Jiau, 43, of Fremont, Calif., who has remained imprisoned for nine months because it was determined that the Taiwan-born researcher was a risk to flee. Still, the sentence was only half of what was called for by federal sentencing guidelines.
The Israeli-born Goffer, who lives in Brooklyn, was convicted with two others in June in a conspiracy to pay bribes to coax confidential information out of two shady lawyers at a Manhattan firm. The arrests were part of what prosecutors called the biggest hedge fund insider trading case in history. In all, more than two dozen people have been convicted in the probe.
The sentencings Wednesday came weeks before the scheduled sentencing next month of Raj Rajaratnam, a one-time billionaire hedge fund founder who was convicted on insider trading charges earlier this year. Prosecutors say he made more than $50 million through illegal trades and are seeking a prison term of more than 24 years.
When the charges against Rajaratnam and Goffer were announced in the fall of 2009, prosecutors said they had made unprecedented use of wiretaps, in part because white collar criminals were starting to use techniques to cover up their crimes that made them resemble common criminals.
The wiretaps eventually led to a separate probe of researchers in the securities industry who enable illegal secrets to be passed between hedge fund managers and employees of public companies. Jiau was among 13 people arrested last year in that probe.
At his sentencing, Goffer apologized to investors in the stocks in which he had an unfair advantage, saying: “They didn’t have the information I had.”
He began crying when he apologized to his brother, Emanuel, who was convicted at trial along with him and is awaiting sentencing. A third defendant, Michael Kimelman, also awaits sentencing.
“He knows I love him,” he said of his brother. Zvi Goffer said he didn’t always understand the seriousness of the crime but had awakened to its tragic consequences.
“Now today I have to face it and I am terrified,” he said.
The sentence caused Goffer’s wife to break down in sobs.
“What am I going to do?” she called out in court at one point. “It’s not fair!” A woman beside her then shouted a profanity, causing Sullivan to rise from the bench and threaten to bring in U.S. marshals to make arrests.
“This is a courtroom, not a street corner,” he said. “I am not going to tolerate this.”
Goffer was convicted by a jury that viewed evidence that he had arranged to pay two attorneys nearly $100,000 in 2007 and 2008 for inside tips on mergers and acquisitions.
During the two-week trial, prosecutors introduced evidence that Goffer gave conspirators prepaid cellular telephones in an effort to reduce detection by law enforcement.
The judge said Goffer had repeatedly demonstrated that he knew he was breaking the law and didn’t care.
“It’s a game that you and others seem to find exciting,” he said, adding that Goffer had a gambler’s mentality that led him to “double down and go to trial” when he would have shaved three years off his prison sentence by accepting responsibility before trial and admitting his crimes.
“You went for broke. You gambled and lost on that, too,” Sullivan said.
Before starting his own firm, Goffer worked for nine months for Rajaratnam.
Jiau was convicted of charges that she conspired to accept cash and gifts to feed inside information to hedge funds.
Jiau, a U.S. citizen, worked for two years as a consultant for Primary Global Research, a Mountain View, Calif.-based company.
Prosecutors said she earned more than $200,000 by selling “tomorrow’s news today” about earnings and performance of publicly traded companies. The information, they say, was communicated in code with her co-defendants, sometimes using “cooks” to refer to tipsters, “recipe” for the inside information and “sugar” for what she was paid for
Lawyers for both Jiau and Goffer said their clients were left in financial ruin and their careers were destroyed.
Jiau told Rakoff she was “sorry for being here.”
She also apologized to her dog, a Golden Retriever named Hunter who is being cared for by friends, saying: “I’m sorry I broke my promise to take care of you and be with you.”