Three former Wall Street traders who were charged in a broad crackdown on insider trading by the U.S. government lost their bids to reverse their convictions and sentences on Monday.
The 2nd U.S. Circuit Court of Appeals in New York upheld the 2011 convictions and sentences of traders including Zvi Goffer, once dubbed "Octopussy" after the James Bond film thanks to his various sources of information.
The ruling allows to stand the 10-year sentence handed to Goffer, 36, a former trader at Schottenfeld Group. Goffer's sentence was the third-longest U.S. sentence for insider trading.
"Goffer's corrosive influence on the integrity of the financial markets and on the expectation of trust and confidence between attorney and client required a significant punishment," U.S. Circuit Judge Richard Wesley wrote.
The two other traders who lost their appeals were Craig Drimal, 57, and Michael Kimelman, 42. While the court upheld Goffer's sentence, it said an order requiring him to forfeit more than $10 million be recalculated.
Monday's decision marked the latest victory for federal prosecutors in Manhattan in a sweeping insider trading probe that has led to charges against 81 people since October 2009.
The 2nd Circuit last week also upheld the 2011 insider trading conviction of Galleon Group hedge fund founder Raj Rajaratnam, who is serving an 11-year sentence.
Prosecutors said Goffer, who briefly worked at Galleon, acted as ringleader of a conspiracy to trade on tips ahead of takeover announcements involving companies including 3Com Corp. and Axcan Pharma Inc.
As part of the scheme, Goffer paid bribes to two lawyers at Ropes & Gray to learn about deals the law firm was handling, prosecutors said.
The lawyers, Arthur Cutillo and Brien Santarlas, pleaded guilty and cooperated with prosecutors.
In total, participants in the scheme earned more than $10 million in profit, according to Monday's decision.
Kimelman, who cofounded trading firm Incremental Capital with Goffer along with brother Emanuel Goffer, received a 2-1/2-year prison term in October 2011.
Drimal, who worked at Galleon, was sentenced to 5-1/2 years in prison in August 2011 after pleading guilty.
In its ruling on Monday, the appeals court rejected the defendants' contention that wiretap evidence should not have been admitted against them.
Wesley, writing for the court, said the wiretaps were "lawfully obtained and properly admitted."
The court also rejected Kimelman's arguments that the government had not proved Goffer tipped him about 3Com, that he knew Goffer had illegal nonpublic information about the deal, and that the jury instructions at his trial were improper.
Lawyers for Goffer and Kimelman did not immediately respond to requests for comment. Arlene Villamia-Drimal, Drimal's wife and attorney, expressed disappointment, saying, "it was a long shot but thought we had to try it."
The case is U.S. v. Goffer, 2nd U.S. Circuit Court of Appeals, No. 11-3591.
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