Ex-Lawyer Testifies Against Galleon Trader Zvi Goffer

The second Galleon Group trial is in full swing, and ex-lawyer Brien Santarlas took a huge proverbial swing, from the witness box, against Zvi Goffer, the former Galleon trader. Santarlas testified that he used another lawyer as a middleman to pass confidential information to Goffer, who then paid Santarlas for the tips. 

Santarlas use to work at the Ropes & Gray law firm. Another lawyer, Arthur Cutilo, was also employed at Ropes & Gray. They both passed information to middleman lawyer Jason Goldfarb concerning takeovers and mergers that Ropes & Gray was handling. Payments came in cash-stuffed envelopes from Goldfarb. The trio of corrupt lawyers has pleaded guilty in the case.

Prosecutors let the jury hear a tape between Goffer and Goldfarb in which Goffer brags that working for Galleon meant "I'm playing on a bigger scale." It was the confidential information furnished by Santarlas and Cutilo that got Goldfarb the job at Galleon, according to prosecutors.

Goldfarb went so far as to describe to Santarlas the procedure for disposing of cellular phones used to relay the inside information that began flowing in the summer of 2007. Santarlas admitted knowing what he was doing was wrong, he just couldn't stop himself:

"My understanding was the trader would buy the stock and he could essentially make money when the acquisition was announced publicly," he testified.

The trial picks up again on Monday.

Eric Bank, Freelance Writer

© 2011 Hedge Fund Writer LLC

Barclays Loses Lawsuit

Barclays Bank has lost a lawsuit that could cost it millions of pounds. The defeat was at the hands of a former employee, a proprietary trader named Alan Burnell who is founder of Nylon Capital. 

The venue last February of Barclay's loss was the London Court of International Arbitration, it was revealed last week. Nylon, founded in 2004, had received several hundred million pounds of capital investments from Barclays with the understanding that the seed money would remain with Nylon for a period of at least 12 months. Barclays pulled the plug after a scant four months.

Nylon's loss of seed capital caused it to liquidate its entire portfolio to repay Barclays. The London judge found Barclays liable for damages – the amount is to be set later this month.

The Barclays investment in Nylon topped several hundred million pounds. The bank also ran Nylon's back office and provided other support. In 2009 Nylon earned £12.4 million, but then lost £2 million in 2010. The investment firm is seeking a refund of expenses from Barclays and to have the bank removed from the board.

Nylon remains optimistic, and is currently raising a new round of capital to restart its global macro strategy.

Eric Bank, Freelance Writer

© 2011 Hedge Fund Writer LLC

No Delay: Second Galleon Trial Starts

Jury selection has begun for the second Galleon Group insider trading trial, despite a motion to delay filed by one of the defendants, Emanuel Goffer. Goffer, his brother Zvi, and Michael Kimelman all worked at Incremental Capital hedge fund, founded by Zvi Goffer, a former Galleon trader. 

The delay motion was set aside by U.S. District Judge Richard Sullivan, who said that the supposed reason for delay – the inflammatory nature of the first trial in which Raj Rajaratnam was found guilty – didn't make sense:

"The court sees no reason, and Goffer has not offered one, why potential prejudice resulting from a juror's familiarity with Rajaratnam's trial cannot be identified and addressed during jury selection."

 Another motion, also rejected by Judge Sullivan, was offered by Kimelman, who claimed he had been denied his "right" to argue his innocence due to his rejection of a no-jail-time plea offer. The judge said the argument was of "little probative value."

Prosecutors are expected to offer at least wiretap tapes into evidence at the second Galleon trial. The government will also call a number of cooperating witnesses to testify for the prosecution.

First Trial Was Decided Early On

It was also learned today that jurors at the first Galleon trial had reached consensus on Rajaratnam's guilt early in their deliberations. Two jurors confirmed the early decision, despite requests by the trial judge Richard Holwell that jurors not speak to the press. Apparently, it was only an abundance of thoroughness that caused the long drawn-out deliberations that lasted 10 days and covered 14 counts against Rajaratnam.

Juror Leila Gonzalez Gorman let it be known that no juror ever objected to the guilty findings, though some did play "devil's advocate".

"We all wanted to give Raj the benefit of the doubt," Gorman told the Wall Street Journal. "I wanted to believe he was an honest man. How could someone so smart and rich already be involved in something so horrendous?"

Eric Bank, Freelance Writer

© 2011 Hedge Fund Writer LLC