By David Glovin, Patricia Hurtado and Bob Van Voris – Oct 10, 2011 12:01 AM ET
Galleon Group LLC co-founder Raj Rajaratnam is set to be sentenced this week for insider trading after being convicted by a jury in Manhattan federal court for directing the biggest insider-trading scheme in a generation.
Prosecutors say Rajaratnam, who was convicted in May, should serve as long as 24 1/2 years in prison, calling him the “modern face of insider trading.” Last month, judges in Manhattan sentenced two other convicted insider traders — Zvi Goffer and Winifred Jiau — to prison terms of 10 years and four years, respectively. Emanuel Goffer, Zvi’s brother, got a three- year sentence Oct. 7.
Since Rajaratnam’s arrest in October 2009, judges in Manhattan federal court have sentenced 13 defendants in cases linked to Galleon. All but two pleaded guilty. The average prison term has been 35.8 months, or almost three years behind bars.
The cases are as follows:
Zvi Goffer, a former Galleon Group trader, was sentenced to 10 years in prison, after jurors in June convicted him of leading an insider-trading ring. He hasn’t reported to prison.
Emanuel Goffer was sentenced to three years in prison after being convicted of one count of conspiracy and two counts of securities fraud. He was given 60 days to report to prison at his Oct. 7 sentencing.
Winifred Jiau, who worked as a consultant at Primary Global Research LLC, was convicted at a trial in June of passing earnings and other information about companies including Nvidia Corp. She was sentenced to four years and is jailed at the Metropolitan Correctional Center in New York.
Danielle Chiesi, who was an analyst at New Castle Funds LLC, pleaded guilty to passing inside stock tips to Rajaratnam and others and trading on them. She was sentenced to 2 1/2 years and begins her sentence on Oct. 18.
Ali Hariri, a former Atheros Communications Inc. vice president, was sentenced to 18 months for leaking information on the company’s forecast cut for the fourth quarter of 2008. He served his time in the Metropolitan Correctional Center in San Diego.
Robert Moffat, a former executive with International Business Machines Corp., leaked inside information about IBM and Lenovo Group Ltd. to Chiesi. He was sentenced to six months in prison and has been released from the Metropolitan Detention Center in Brooklyn.
Mark Kurland, the co-founder of New Castle Funds and Chiesi’s boss, was sentenced to two years and three months after admitting that he used inside information to trade in Advanced Micro Devices Inc. (AMD), Akamai Technologies Inc. and other companies. Kurland is in a prison in Otisville, New York.
Craig Drimal, a trader who worked at Galleon’s offices, was sentenced to 5 1/2 years after admitting that he traded on inside tips obtained from lawyers working on the transactions. Drimal hasn’t yet surrendered to prison.
Arthur Cutillo, a former Ropes & Gray LLP lawyer, admitted to disclosing information on transactions the firm was working on to co-defendant Jason Goldfarb, in exchange for kickbacks. He was sentenced to 2 1/2 years and is now in a prison in Lewisburg, Pennsylvania.
Jason Goldfarb, a lawyer in Brooklyn, New York, was sentenced to three years in prison for passing inside tips he got from Cutillo and another lawyer at Ropes & Gray. Goldfarb hasn’t yet surrendered.
Donald Longueuil, a former SAC Capital Advisors LP portfolio manager, received a sentence of 2 1/2 years for trading and trafficking with colleagues on inside information. Longueuil hasn’t yet surrendered.
Don Ching Trang Chu, a former consultant at Primary Global Research LLC, an expert-networking firm, was sentenced to probation for passing confidential tips to the firm’s hedge fund clients. The judge said jail wasn’t warranted because of his minimal role in the scheme.
Manosha Karunatilaka, a former Taiwan Semiconductor Manufacturing Co. manager, was sentenced to 18 months in prison for accepting about $35,000 to pass inside tips about the company’s orders while also working as a consultant for Primary Global Research LLC. Karunatilaka hasn’t yet surrendered.
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Typically, those convicted at a trial get longer prison terms than those pleading guilty. In addition to the two Galleon defendants who took their cases to a jury, Manhattan judges since 2003 have imposed sentences in three other cases where the main charge was insider trading and a jury returned a guilty verdict.
The average sentence has been six years and two months.
In non-Galleon cases, former Credit Suisse Group banker Hafiz Muhammad Zubair Naseem got 10 years, ex-Jefferies Paragon Fund money manager Joseph Contorinis was sentenced to six years, and former Ernst & Young partner James Gansman was sentenced to one year.
About two dozen others are waiting to be sentenced in the Galleon cases. They include Anil Kumar, a former McKinsey & Co. executive who pleaded guilty and testified against Rajaratnam in a bid for leniency.
The Rajaratnam case is U.S. v. Rajaratnam, 1:09-cr-01184, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporters on this story: David Glovin in Manhattan federal court at glovin@bloomberg.net; Patricia Hurtado in Manhattan federal court at phurtado@bloomberg.net; Bob Van Voris in Manhattan federal court at rvanvoris@bloomberg.net.
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.
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