A lawyer who pleaded guilty to passing confidential information to the Raj Rajaratnam insider trading ring, was sentenced to prison.  Jason Goldfarb, 33, obtained corporate secrets from a prominent law firm, then paassed that information to others.  For his efforts, Mr. Goldfarb is going to prison for 3 years.  He's one of 50 people who have been charged in a wide-ranging probe focused on insider trading at hedge funds. 

Goldfarb, who pleaded to conspiracy and securities fraud charges in April, was sentenced to slightly less than the 37-46 months called for by the federal sentencing guidelines and sought by federal prosecutors.  But it was a much steeper sentence than sought by Goldfarb's lawyer, who requested no prison time.

Prosecutors' Allegations.   Prosecutors say Goldfarb received inside information about mergers and acquisitions involving public companies from 2 lawyers at Boston-based Ropes & Gray.  He passed the information on to a stock trader in exchange for $32,500 in cash bribes, according to prosecutors.

The two Ropes & Gray attorneys - Arthur Cutillo and Brien Santarlas - had pleaded guilty.  Cutillo was sentenced to 30 months in prison.  Stock trader Zvi Goffer was convicted at trial along with 2 others in June.

U.S. District Judge Richard Sullivan in Manhattan imposed Goldfarb's sentence in front of a packed courthouse following a 3-hour hearing that featured emotional pleas for leniency from Goldfarb's clients, colleagues, friends and family, including his fiancee, mother, and father.

• Many of them said that Goldfarb's participation in the scheme was motivated by his desire to financially help his father, whose business was failing, and his mother, who was diagnosed with cancer.
• Michael Soshnick, a lawyer for Goldfarb, said that all of the $32,500 he made from the scheme went to his parents.
• "My client was not motivated by greed but by need," said Soshnick.

Richard Tarlowe, a federal prosecutor, told Judge Sullivan that the picture of Goldfarb acting out of desperation was "very hard to reconcile from the picture that emerges from the evidence, most specifically, the wiretaps, the phone calls."  He was referring to recorded phone calls that investigators collected during their investigation.  At one point, Sullivan requested that one of the tapes be played in which Goldfarb is discussing with Goffer the potential profits they could make from the scheme.

• "Every one of us should be set for life within a year or two if things are played right," said Goldfarb.
• Sullivan referred to Goldfarb as one of the leaders of a "sophisticated scheme that was designed to steal privileged information, confidential information from its clients to be used by hedge fund managers and traders."
• He said the crime of insider trading was serious and had to be treated seriously, and needed to send a message.

The case is USA v Goffer et al, U.S. District Court for the Southern District of New York, No.10-056.    [Reuters, 8/19/11]