DA: Distractions at insider trading trial

A prosecutor warned jurors in the second trial to result from a probe of insider trading at hedge funds not to be deceived by the three defendants' efforts to throw them "off the scent" of crimes that generated millions of dollars in illegal profits.

Assistant U.S. Attorney Richard Tarlowe told the jury in U.S. District Court in Manhattan on Monday to follow the trail of dozens of taped conversations of the defendants to learn how stock trader Zvi Goffer executed a scheme to pay nearly $100,000 in bribes to coax inside information about mergers and acquisitions from two lawyers at a Manhattan firm in 2007 and 2008.

The investigation, which generated more than 1,000 taped conversations, led to more than two dozen arrests and the conviction on insider trading charges two weeks ago of Raj Rajaratnam, the one-time billionaire who founded the Galleon Group of hedge funds. Goffer worked with Rajaratnam for nine months before Goffer started his own investment firm.

Prosecutors said the Galleon probe was the biggest into inside trading in the hedge fund industry. They said the case also marked the first extensive use of wiretaps in such a case.

Goffer is on trial with his brother, Emanuel, and defendant Michael Kimelman. All three pleaded not guilty to charges they conspired to break securities laws, insisting they based trades on public information.

Tarlowe told jurors to follow the trail of taped phone conversations to see how the defendants committed crimes then tried to hide their behavior by talking on prepaid phones and taking sensitive conversations to in-person meetings on the street.

In a closing argument, Goffer attorney William Barzee said that prosecutors were trying to win a conviction based on a few taped conversations among 18,000 phone calls, text messages and emails they recovered.