NEW YORK (Reuters) - A former attorney with a prominent law firm pleaded guilty on Friday to his role in the Galleon hedge fund insider trading case, saying he was paid $32,500 in cash from profits made by trader Zvi Goffer, a main defendant in a probe of two intertwining networks.
Arthur Cutillo, 34, formerly of Ropes & Gray LLP in New York, was indicted in January 2010 along with six other traders and lawyers, including Goffer, formerly of Galleon, The Schottenfeld Group LLC and Incremental Capital. On Friday, Cutillo pleaded guilty in U.S. District Court in New York to charges of conspiracy and securities fraud.
The prosecution is part of a broad probe federal prosecutors described as the biggest investigation of insider trading at hedge funds in the United States when they arrested and charged Galleon founder Raj Rajaratnam in October 2009. The probe expanded in the last two months to focus on consultants who gather company information for funds.
Cutillo said at his plea proceeding he received $32,500 in cash for providing inside information on transactions involving 3Com Corp and Axcan Pharma Inc in 2007.
Cutillo told U.S. District Judge Richard Sullivan he and then fellow Ropes & Gray lawyer Brien Santarlas provided another lawyer, Jason Goldfarb, with the confidential information about their firm’s clients. He said Goldfarb, an old college roommate of Cutillo, passed it on to Goffer.
The trader, dubbed “the Octopussy” by authorities for his purported reach to many contacts, has pleaded not guilty to conspiracy and securities fraud charges. Goldfarb paid Cutillo and Santarlas a total of $32,500 each for tips on the two transactions, Cutillo told the court.
He said he understood the money came from Goffer’s trading profits.
“I would like to sincerely apologize,” a statement read by Cutillo in court said in part. “I am truly ashamed by my actions.”
Under a plea agreement, Cutillo faces a prison sentence of between 30 months and 37 months. He did not agree to cooperate with the government.
Of 24 people criminally charged in two purportedly linked networks sharing confidential information about publicly traded companies, 15 have pleaded guilty.
Goffer’s lawyer, Cynthia Monaco, could not immediately be reached to comment on Cutillo’s statement in court.
Goffer and Goldfarb have pleaded not guilty and are scheduled to go on trial on May 9.
Santarlas has pleaded guilty and is cooperating with prosecutors.
Rajaratnam has also pleaded not guilty and will go on trial on February 28.
The cases are USA v Raj Rajaratnam et al, U.S. District Court for the Southern District of New York, No. 09-01184 and USA v Goffer et al, No. 10-00056.
Reporting by Grant McCool; editing by Andre Grenon