The Department of Justice today charged 14 individuals with involvement in insider trading. These include current and ex-employees at the hedge fund Galleon Group, the proprietary trading companies Schottenfeld Group and Incremental Capital, and the law firm Ropes & Gray. The Wall Street Journal has the details:
The complaint alleges former Galleon and Shottenfeld Group LLC employee Zvi Goffer, and at least six other defendants knowingly conspired to defraud, make untrue statements and omit facts, as well as engage in fraudulent and deceitful acts. Mr. Goffer allegedly operated an insider-trading network, obtaining nonpublic information about companies’ planned merger and acquisitions.
Mr. Goffer would then allegedly use the information to execute profitable securities transactions and provide inside information to other conspirators to earn similar profits. It is also alleged that Mr. Goffer provided the co-conspirators with prepaid cellphones so they could reduce the chances of law-enforcement detection.
Insider-trading activity was suspected in the 2007 acquisition of Avaya Inc. Avaya agreed to a merger with Silver Lake and TPG Capital, which were legally advised by Ropes & Gray. The firm also legally advised Bain Capital Partners LLC, which acquired 3Com in 2007.
The complaint alleges there was probable cause to believe Mr. Goffer and his conspirators engaged in insider trading in the acquisitions of Kronos Inc. and Hilton Hotels Corp.