By Nate Raymond
NEW YORK (Reuters) - Lawyers for a pair of traders who were
found guilty as part of the government's wide-ranging crackdown
on insider trading at hedge funds have urged a federal appeals
court to reverse their convictions.
Attorneys for Zvi Goffer, a former securities trader who
once worked at the hedge fund Galleon Group, and Michael
Kimelman, co-founder of trading firm Incremental Capital, asked
the 2nd U.S. Circuit Court of Appeals on Monday to vacate their
clients' 2011 convictions.
Goffer's lawyer also argued that the 10-year sentence his
client received from U.S. District Judge Richard Sullivan should
be thrown out.
That sentence is disproportionate compared to the
punishments meted out to other insider trading defendants such
as Galleon founder Raj Rajaratnam, Alexander Dudelson argued to
a three-judge panel of the 2nd Circuit.
The lower court also increased the sentence inappropriately
because Goffer did not plead guilty, Dudelson said.
"It's the appellant's position he was punished for going to
trial," he said.
Goffer is serving his sentence at a federal penitentiary in
Lewisburg, Pennsylvania, according to the Federal Bureau of
His sentence is the third-highest ever handed down in an
insider trading case, according to his appeals brief. Dudelson
has noted that his client received just one year less than
Rajaratnam, even though the case against the Galleon founder, a
onetime billionaire, involved an alleged gain of $50 million as
well as charges of obstructing a U.S. Securities and Exchange
Prosecutors said Goffer, a trader at Schottenfeld Group, was
the ringleader of a scheme to trade on tips ahead of the public
announcement of deals involving computer network equipment maker
3Com Corp, Canadian drug company Axcan Pharma Inc and other
The other defendant, Kimelman, who worked with Goffer's
brother, was convicted as part of the same scheme and sentenced
to 2-1/2 years in prison.
Dudelson also contrasted the treatment of Goffer compared
with Rajat Gupta, the former Goldman Sachs director convicted
for leaking non-public information to Rajaratnam. Gupta received
a two-year prison sentence in October.
Unlike Gupta, Dudelson said, Goffer had not breached
Circuit Judge Richard Wesley noted that Goffer allegedly
paid kickbacks to lawyers at the law firm Ropes & Gray for
information on upcoming corporate acquisitions.
"He's 34 years old, the age of one of my children," Wesley
said. "You'd think he'd know better."
Now 36, Goffer was 34 at the time he was sentenced.
Michael Sommer, a lawyer for Kimelman, argued that
prosecutors had failed to present any evidence that his client
knew he had received inside information before making trades in
stock of 3Com in fall 2007.
"There are thousands of recordings, and on not one is there
a tip," Sommer said.
Andrew Fish, an assistant U.S. attorney, said it was
"undisputed" that Kimelman was a member of the conspiracy and
that a juror, based on the evidence, could "infer he traded with
knowledge at the time of the 3Com transaction."
The cases are United States v. Kimelman and United States v.
Goffer, 2nd U.S. Circuit Court of Appeals, Nos. 11-4409 and
For USA: Andrew Fish, Manhattan U.S. Attorney's Office.
For Goffer: Alexander Dudelson, Law Offices of Alexander M.
For Kimelman: Michael Sommer, Wilson Sonsini Goodrich &
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