Trader threw phone away to hide evidence: NY trial

A stock trader testified at the insider trading trial of three former associates on Tuesday that he threw away his mobile phone after learning of the arrest of hedge fund manager Raj Rajaratnam in October 2009.

David Plate was the third government witness who pleaded guilty in the sweeping case to testify against former Galleon trader Zvi Goffer, his brother Emanuel Goffer and Michael Kimelman at their Manhattan federal court trial. Plate said Zvi Goffer, 34, gave prepaid phones to him and others to discuss purported corporate secrets. "I threw it away after I saw Raj Rajaratnam got arrested," Plate said under questioning by prosecutor Andrew Fish. When Fish asked Plate why he disposed of the phone, Plate replied: "It was evidence." Plate, the Goffer brothers, Kimelman and others were all arrested on Nov. 5, 2009, just weeks after the Rajaratnam charges shook up the lightly regulated hedge fund industry, mainly because much of the evidence was gathered using phone taps and other secret recordings. Rajaratnam, founder of the Galleon Group, was convicted at trial two weeks ago in what prosecutors call the biggest probe of insider trading at hedge funds. "We were told that whenever we had even slightly sensitive information we should use them (prepaid phones)," Plate, formerly with Schottenfeld Group LLC, told the jury. Calls and text messages on the phones would have been more difficult to trace to the users because they were not registered in their names, jurors heard. The Goffer brothers and Kimelman founded a trading firm called Incremental Capital LLC in August 2008 after Goffer was dismissed from Galleon after working there for eight months. The trial covers their activities from 2007 to 2009. Fish told U.S. District Judge Richard Sullivan the government would rest its case by the end of the week. Prosecutors have played more than two dozen phone calls or meetings recorded by cooperating witnesses. The trial began on May 16. Trial hears lawyers gave tips   In cross-examinations, defense lawyers have attacked the credibility of the three men who have testified, including multimillionaire hedge fund trader David Slaine. He worked for Galleon more than a decade ago before establishing his own company and admitting to insider trading charges in 2002. The lawyers told the jury the witnesses testified in hopes of receiving leniency when they are sentenced. The three defendants are charged with conspiracy and securities fraud. Prosecutors say they obtained inside corporate information from two lawyers at law firm Ropes & Gray LLP, Brien Santarlas and Arthur Cutillo, via a third lawyer, Jason Goldfarb. The three lawyers have all pleaded guilty and are awaiting sentencing. Santarlas testified last week he destroyed his prepaid phone on the orders of Zvi Goffer. Cutillo is also expected to testify. If convicted by the jury, the Goffers and Kimelman, 40, could face up to 25 years in prison. Rajaratnam, 53, was convicted in the same New York courthouse on May 11 on all 14 criminal counts he faced. The case is USA v Zvi Goffer et al, U.S. District Court for the Southern District of New York, No. 10-00056.