Appeals Court Upholds 'Octopussy' Insider Trading Conviction

Zvi Goffer
Getty Images
By LARRY NEUMEISTER

NEW YORK -- A stock trader nicknamed "the Octopussy" because he had access to so many sources of inside information was properly convicted and sentenced to 10 years in prison, a federal appeals court concluded Monday.

The 2nd U.S. Circuit Court of Appeals upheld the conviction of Zvi Goffer and two others in a case the government had once touted as the biggest insider trading prosecution in history.

In all, more than two dozen defendants were convicted, including a one-time billionaire whose hedge funds had commanded as much as $7 billion.

The Israeli-born Goffer was convicted with two others in 2011 in a conspiracy to pay bribes to two lawyers at a Manhattan law firm. The government said Goffer and others earned more than $10 million illegally.

Goffer, whose nickname is a reference to a James Bond film, was sentenced to 10 years in prison after prosecutors said he arranged to pay two attorneys nearly $100,000 in 2007 and 2008 for inside tips on mergers and acquisitions. Prosecutors said Goffer's network used prepaid cellphones to avoid detection and destroyed them after each successful tip.

His lawyers challenged his conviction and sentence on several grounds, including that wiretap evidence should have been suppressed, that jury instructions were erroneous and that Goffer was punished for refusing to plead guilty.

A three-judge panel of the Manhattan appeals court noted the novelty of using wiretaps in a securities fraud case as it rejected defense arguments that the law permitting wiretaps does not list securities fraud as an offense for which it can be used. The government has said it made the most extensive use of wiretaps ever in the insider trading probe.

The court also rejected arguments that Goffer was treated more harshly than similarly situated white-collar criminals. The 2nd Circuit said assuming "that some judges have chosen as a policy matter not to sentence white-collar criminals to the harshest permissible punishments, this does not entitle other white-collar criminals to lighter punishments than are reasonable."

The appeals court said Goffer orchestrated and ran a large-scale, cash-for-tips scheme to fuel an insider trading conspiracy.

"Goffer took steps to disguise his wrongdoings by distributing disposable cellphones, using fake research to cover his illegal trades and refusing to speak about sensitive topics on the telephone," the 2nd Circuit said.

It added, "Goffer's corrosive influence on the integrity of the financial markets and on the expectation of trust and confident between attorney and client required a significant punishment." Lawyers did not immediately return messages seeking comment.

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George Jr.

he gets sent to jail for insidertrading, and the people who are suppose to be running this country make laws that make it legal for them to do the same thing, but yet not get into any trouble.

July 02 2013 at 1:03 PM Report abuse +1 rate up rate down Reply
dragonstalon1001

To bad they haven't done a dang thing to arrest and try the "Insider Trading" Criminals in our Congress....I guess if they actually upheld the LAWS that are on the books, the Police and Regulatory Commissions wouldn't know what to do, since they have refused to follow Federal Laws for so long.

July 02 2013 at 7:17 AM Report abuse +2 rate up rate down Reply
rjen164497

With the headline I thought that I was going to read about Nancy Pelosi. I had fogotten it was legal for Congress to insider trade.

July 02 2013 at 7:06 AM Report abuse +3 rate up rate down Reply
Deal Project

i for one hope more corporate and business thieves receive sentences like rank and file crooks get when they commit robbery or continually offend by breaking and enter. of course if i were an understanding, kind and benevolent dictator I have all habitual and serial thieves executed. but that is just me :)

July 01 2013 at 7:35 PM Report abuse rate up rate down Reply
1 reply to Deal Project's comment
dragonstalon1001

Didn't you know that Obama Administration has the lowest Prosecution rates of ANY OTHER PRESIDENT for Insider Trading and Illegal Business practices (such as Jon Corzine "losing" $1.2 Billion of MF Global's Investors money)!!

http://money.cnn.com/2011/12/08/news/companies/corzine_mf_global/index.htm

July 02 2013 at 7:24 AM Report abuse +1 rate up rate down Reply
1 reply to dragonstalon1001's comment
George Jr.

that because the republicains in congress made it legal from them to do inside trading.

July 02 2013 at 1:05 PM Report abuse -1 rate up rate down