FBI charges 14 more in Galleon Group insider trading scandal

[JURIST] Federal authorities have filed charges [press release] against 14 people in connection with insider trading at the hedge fund company Galleon Group [corporate website], weeks after the arrest [JURIST report] of the company's founder. An investigation by the FBI allegedly revealed more than $20 million in illegal profits and led to criminal charges [charging documents] against hedge fund managers, analysts, and lawyers involved in the scheme. The Securities and Exchange Commission (SEC) [official website] also filed civil charges [complaint, PDF] against 13 individuals and companies alleging more than $33 million in illicit gains related to Galleon Group. Manhattan US Attorney Preet Bharara [official website] said that the charges showed the government's focus on white collar prosecution.


When we announced our first arrests three weeks ago, I said this case should be a wake-up call for Wall Street. Today the alarm bells have only grown louder. Over the last three weeks, we have charged 20 defendants with more than $40 million worth of alleged insider trading, and our investigation is ongoing. When criminal activity is your business model, business as usual has to stop.

Bharara and FBI Assistant Director Joseph Demarest [official profile] said that the investigation made use of wiretapping techniques, including "court-authorized pen register and telephone toll records, consensually-recorded conversations between cooperating sources and others, and court-authorized wire taps on various telephones." Speaking at a panel discussion held by the Practising Law Institute [corporate website], Assistant Attorney General Lanny Breuer [official profile] said Friday that the use of wiretaps was vital to a renewed focus [Reuters report] at the Department of Justice (DOJ) [official website] on the prosecution of white collar crime.

In July, the SEC promised to increase oversight [JURIST report] and enforcement of securities laws to better protect investors. The policy reforms come in the wake of recent fraud litigation. In June, financier Bernard Madoff [JURIST news archive] was sentenced to 150 years in prison [JURIST report] on securities fraud charges [complaint, PDF; JURIST report] stemming from his multi-billion dollar Ponzi scheme. Billionaire financier Allen Stanford [BBC report] pleaded not guilty [JURIST report] in June to 21 charges [indictment, PDF; JURIST report] of fraud, conspiracy, and obstruction related to a $7 billion fraud scheme. Former HealthSouth CEO Richard Scrushy [defense website; JURIST news archive] was ordered [JURIST report] to pay $2.88 billion to shareholders after being found guilty of fraud for inflating company profits, insider trading, and other charges.

 

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